What do Amazon, Walmart, Costco, Bank of America, McDonald’s, and Starbucks have in common?
They’re all among the largest US employers and they’ve all raised wages in the last year.
Overall, average hourly earnings in the U.S. are up 4.9% in the last 12 months and 9.6% over the last 24 months. This is significantly higher than the average 12/24 month increases since 2006 of 2.8%/5.4%.
What’s pushing wages higher?
Supply and demand.
The number of job openings in the US currently exceeds the number of unemployed persons by 3 million, a record high.
Help wanted signs are everywhere you look, and employers have had to increase wages to incentivize workers to reenter the labor force.
An additional factor impacting supply is the percentage of workers who are quitting their jobs, which is at an all-time high (2.9%). After three rounds of stimulus checks, employees have additional savings and the ability to leave a job they don’t like in search one that they do. This is putting additional pressure on companies to increase pay and benefits in an attempt to retain employees.
As wages are the biggest expense for most companies, a choice then has to be made. Either the company accepts lower profits or it raises prices of their goods/services, passing on the cost to the end consumer.
Thus far, companies have opted for the latter, a concept known as “wage push inflation.” Consumer prices have increased 6.2% over the last year, the highest rate of inflation in over 30 years.
While this rate of increase is expected to come down at some point in 2022, the pay increases we have seen will not. Amazon and Walmart are not going to pay their employees less next next year. In the near term, the opposite is more likely to happen, as an inflationary spiral has taken hold: higher prices necessitate higher wages which in turn necessitate higher prices, and so on.
Thus far, both the Federal Reserve (“0% rates are still warranted”) and the Federal Government (“trillions more in borrowing/spending is warranted”) have not only been dismissive of this spiral but have continued to take actions that encourage it.
But with each passing month, these profligate policies are becoming harder to defend, with more and more people starting to talk about the harmful effects of higher inflation.
Wage gains are generally great to see and long overdue in the US, but they can’t be viewed in a vacuum. When the cost of living outpaces those pay increases as it is today, that’s a reduction in our standard of living and not something to be celebrated.
At the extreme, it can be an indication of hyperinflation and an economic crisis. Just ask any Argentinean whether the 55% increase in their minimum monthly wage in the last year was a sign of prosperity.
Appendix – Wage and Benefit Increases at Large Corporations since March 2020…
| Month | Company | Wage/Benefit Increase |
| November 2021 | Macy’s | Minimum wage to $15/hour, Education Program to cover 100% of tuition/books/fees. |
| October 2021 | Costco | Minimum wage to $17/hour. |
| October 2021 | Starbucks | Minimum wage to $15/hour, 5-10% increase for workers with company for 2-5 years. |
| October 2021 | Bank of America | Minimum wage to $21/hour. |
| September 2021 | Amazon | Starting pay to $18/hour, operations employees eligible for fully funded college tuition (classes/books/fees) |
| September 2021 | Walmart | Minimum wage to $12/hour. |
| August 2021 | Walgreens | Hourly wages to increase in phases to $15/hour by November 2022. |
| August 2021 | CVS | Minimum wage to $15/hour by July 2022. |
| August 2021 | Schwab | 5% special pay raise to most employees, effective September 2021. |
| July 2021 | Walmart | 100% of college tuition and books for associates. |
| May 2021 | McDonald’s | Average wage increase by 10% over next several months, expects $15/hour average wage by 2024. |
| May 2021 | Chipotle | Average wage to $15/hour by June, employee referral bonuses. |
| May 2021 | Bank of America | Minimum wage to $25 by 2025, requires vendors to pay their workers $15/hour or more. |
| May 2021 | Under Armour | Minimum wage to $15/hour, starting in June. |
| April 2021 | Amazon | Hourly wages increases between 50 cents and $3 per hour for more than 500k workers. |
| March 2021 | Kroger | Hourly wages to $16/hour after raising to $15.50 in 2020. |
| February 2021 | Costco | Minimum wage increase to $16/hour (from $15). |
| November 2020 | Starbucks | Pay increases of at least 10% for all baristas, shift supervisors, and café attendants. |
| August 2020 | Best Buy | Starting wage to $15/hour. |
| July 2020 | Target | Minimum wage to $15/hour (from $13) and giving bonus of $200 to all hourly employees. |
| March 2020 | Wells Fargo | Minimum wage to $20 (from $15) by end of 2020. |
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