Wages are falling behind – here’s what HR can do about it
Nearly half of full-time employees in the U.S. do not earn enough to provide for their families’ basic needs, a new study reveals — and HR leaders can play a direct role in helping reverse that.
In its first Living Wage Index report, HCM company Dayforce, in partnership with the Living Wage Institute, found that men were significantly more likely than women to make a living wage (62% vs. 50%). Meanwhile, it reports that 6 in 10 full-time black and Latino workers do not earn a living wage compared to 32% of white workers.
Just 31% of full-time workers in leisure and hospitality, 36% in retail and 46% in health care make a living wage, the survey also found.
The index is based on data from about nearly 600,000 full-time employees, along with figures from the Living Wage Institute, which helps companies make the living wage a basis of their compensation strategies.
And HR professionals are not mere bystanders when it comes to economic trends. Rather, they can be critical partners to finance teams in evaluating employee compensation, annual cost of living changes and living wage data, said Jason Rahlan, vp of corporate responsibility and sustainability at Dayforce.
“As the economic landscape and state regulations are ever-changing, ensuring that employees are paid a living wage requires regular and consistent monitoring,” he said. “HR leaders can empower their people to identify any gaps and work with colleagues in finance and other departments to help close them.”
While wages lag, another report predicts that pay increases in the coming year (at 3.5%) are expected to fall behind the levels of the past couple of years (3.6% in 2024 and 4% in 2023).
In its annual Salary Budget Survey, compensation management platform Payscale found that employees in science, engineering and government will enjoy a salary bump of better than 4% next year, while those who work in retail, customer service and education will see increases of just 3.1%.
Additionally, just two in 10 companies this year anticipate a compensation budget greater than last year’s, according to the survey, which is based on data from compensation professionals at over 1,500 organizations in the U.S. and more than a dozen other countries.
Even though pay increases are declining, 85% of employees will see an increase in their base pay this year, compared to 83% last year, per the report.
Yet despite earning more money year over year, it’s still not nearly enough for many families. “It’s good news because it’s well over what inflation is right now, but prices and the cost of living overall are still well above that,” said Amy Stewart, principal at Payscale who heads up research and insights.
Lulu Seikaly, the company’s senior employment counsel, added that the meaning of a “living wage” varies widely across the U.S. due to differences in minimum wage laws and the cost of living. She notes that in Texas, the minimum wage is the same as the federal minimum wage — $7.25 per hour — a number that has remained unchanged since 2009 and that hardly provides for the high cost of living in a city like Dallas, where she lives. By contrast, a number of other states and municipalities have instituted a higher minimum wage, having adjusted it to be closer to a living wage.
Again, the role of HR cannot be overemphasized when it comes to making sure employees are being compensated enough.
“What I tell our HR teams is, you are basically like the mediators between finance and the employees,” Seikaly said. If a CFO were to push back on recommendations regarding raises, she argued, it’s up to HR leaders to say, “Here’s the data—and this is what’s going to happen with attrition if we don’t get at least 3%.”
It’s all part of a “revolution” in HR, Payscale’s Stewart said, where HR leaders are increasingly involved in strategy — vs. the past, when they were largely seen as an administrative function.
“HR has a seat at the table and they’re saying, ‘Look, your employees are a core factor of your business— and if you cannot attract, retain and engage those employees, your business is not going to succeed,” Stewart said.