Minnesota employees likely to see more pay raises in next year

The pressure on employers to raise wages is likely to increase in the new year. While the job market already has led employers to raise minimum wages or renegotiate hourly pay in the middle of contract terms, average increases have not kept up with inflation.

New national surveys by employment benefits firm Mercer and the Conference Board have analysts predicting a continuation of high turnover and other issues if employers don't address pay issues. The Mercer survey found that raises planned for 2022 are only half the rate of inflation.

"At the moment most organizations are still struggling to attract and retain the talent they need," said Lauren Mason, a senior principal for Mercer. "The job landscape is changing for workers and their needs. With 10.4 million open jobs, the reality is that most employees would have no trouble finding a new role — and [could] likely command a premium for job switching."

Stresses from the pandemic and the tight job market already have resulted in unprecedented turnover rates nationwide and burnout among those on the front line such as health care and hospitality workers.

Some Minnesota employers already have instituted raises to stem turnover and attract new workers.

Reuben Moore, president of Minnesota Community Care in St. Paul (MCC), recently boosted starting wages by 17%, from $17 to $20 an hour for 430 workers from medical assistants to patient schedulers and data managers at the organization's 16 clinics.

"For us, this was about financial equity and staff well-being," Moore said. "Wages and equity mean earning enough to pay the bills. ... We see a huge number of people who are still in poverty and still working."

Affinity Plus Credit Union on Dec. 21 is enacting a 4% pay raise for all 550 of its workers. The pay raise is retroactive to Jan. 1 so the workers also will receive a lump sum check for back pay, the company said. The credit union also will start paying time and a half for Saturday shifts.

The Conference Board report, which relied on surveys of large corporations, predicted competition for wages, plus the rate of inflation, would push actual wage growth "well above" 4% sometime in 2022. In April, surveyed employers estimated that their average wage increases in 2022 would be 3%. But that changed to 3.9% when asked again in November.

"Wages for new hires and workers in blue-collar and manual services jobs will grow faster than average," Gad Levanon, who leads the Labor Market Institute for the non-partisan Conference Board, wrote in the report.

Mercer surveyed 950 companies and found average compensation budgets going up 3.2% for merit pay and 3.5% for base pay. The projections, which exclude one-time bonuses, are far below the country's 6.8% inflation rate.

While Mercer acknowledged employers wrestle with economic unknowns of the pandemic, they are also struggling with a tight labor market, excess turnover and with employees stressed about soaring prices for heat, gas, food, cars and day care.

With that kind of unprecedented level of churn in the hot labor market, Mason suggested employers focus on their hourly pay strategies now.

To date, 37% of the employers Mercer surveyed said they beefed up starting wages since March. Another 5% were considering doing so by Dec. 31.

Separately, surveyed employers said they planned to boost bonuses by roughly 10% next year.

In October, the Minnesota Department of Employment and Economic Development reported that second-quarter job openings in the state hit a record 205,000, an 84% increase from the year before.

Doug Loon, president of the Minnesota Chamber of Commerce, said most of his 2,300 members surveyed this summer said they were increasing wages, benefits, training and flexibility to attract and retain workers during stressful times.

"We know that Minnesota employers need 205,000 more workers and yet we still have [about] 120,000 workers who have not returned to work compared to pre-pandemic," he said. "We know we are short [workers]."

There is such a shortage of workers in nursing homes, clinics and hospitals because of burnout and retirements that employers are offering bonuses and renegotiating hourly wages mid-contract, said Jamie Gulley, president of SEIU Healthcare Minnesota.

"We are renegotiating wages across many of our facilities in the middle of the contract," Gulley said. Methodist Hospital in St. Louis Park and North Memorial Health Hospital in Robbinsdale both agreed to mid-contract increases of 5%.

Mayo Clinic increased its pay scales by $2 and $3, depending on position, because of a shortage of health care workers, he said. Starting wages there for those covered by the SEIU contract are now $19 to $21 an hour.

Separately, the food workers at Mayo received $500 bonuses, he said.

Mercer officials also said employers should think broader than just compensation as they strategize for 2022.

"While pay matters — a lot — in many cases it's when the broader employee experience falls short that employees will start to shop their options," Mason said.

If employees are exhausted and burned out from the pandemic, "employers need to examine ways to support their employees' unmet needs, deliver more compelling jobs and create more flexible work environments," she said.