2022 has certainly been a topsy-turvy year. Unemployment is at record lows (lowest in 50 years), but inflation has also been its highest (hovering between 8% and 9%). Good news – the data are starting to come in regarding 2023! In this part one of a three-part review of 2023 compensation planning projections, we will share what we have found.
2023 U.S. Economy
There are conflicting predictions coming in regarding 2023. Some are forecasting a major recession and the return of higher unemployment. Others take a more optimistic view and see inflation coming down but unemployment remaining low. The following is the most up to date outlook from the experts that ultimately will have an influence on compensation budgeting for 2023.
Goldman Sachs Analysts Upgrade their 2023 Forecasts (https://www.goldmansachs.com/)
Goldman Sachs updated its own prediction, reporting that a recession is now twice as likely than it had previously forecasted. Earlier this year, the bank estimated that the chance of a recession in the coming year was 15%. Now it’s 30%—and even more likely if you project out another year. Goldman Sachs also downgraded its U.S. GDP estimates below consensus for the next two years to reflect the drag on the economy. “The Fed has front-loaded rate hikes more aggressively, terminal rate expectations have risen, and financial conditions have tightened further and now imply a substantially larger drag on growth — somewhat more than we think is necessary,” Goldman’s economists said in a note from late-Monday. Goldman Sachs forecasts a 25% conditional probability of the United States entering a recession in 2024 if it avoids one in 2023, adding that this meant that there was a 48% cumulative probability of a recession over the next two years compared to its prior forecast of 35%.
Alternative Economic Indicators
While there are many “experts” that voice their opinions regarding how the economy will play out in 2023, there is one often over-looked economic indicator that has been very consistent in predicting how strong the economy will be year after the year. This is the “Carboard Box Economic Indicator,” mentioned several times in previous Astronology® articles. Most if not all durable goods manufactured in the United States are shipped in cardboard containers. This industry must be ahead of the curve to be sure that the cardboard containers are available to meet the projected demands of the manufacturers. Below is an updated projection graphic from www.anythingresearch.com:
As can be seen, the indicators remain somewhat flat from 2022 into 2023, reflecting Goldman’s projection of a recession continuing into 2023. In fact, it appears that this industry will remain flat until 2027.
The Impact of the “Unofficial” Minimum Wage
The “unofficial” minimum wage continues to grow and is having a dramatic impact on internal pay structures. Continued movement beyond $15.00 an hour towards $20.00 an hour has created serious internal compression among employees, and especially for those who supervise employees. Here is a list of companies that have established a $20 minimum wage: https://ivetriedthat.com/jobs-that-pay-20-an-hour/
- Taco Time NW – This locally-owned, Mexican-style restaurant chain founded by the Tonkin family has been committed to raising the wages of their crew to “livable wages” and last increased the crew’s salary at the end of 2021.
- The Boston Beer Company – Brewers of this company earn about $24 an hour.
- McCain Foods USA, Inc. – Production specialists at the food production company earn between $20 and $25 an hour.
- Mccormick & Co Inc. – If you’re looking for factory jobs in the food production industry, you can earn over $20 an hour as a blending machine operator.
- Land O’Lakes, Inc. – This farmer-owned food production cooperative pays machine operators starting at $20 an hour, while their maintenance mechanics get over $25/hour.
- The Kraft Heinz Company – Quality specialists at this company earn at least $22 per hour. Kraft Heinz is home to over 20 food brands, so expect availabilities in factories near you.
- Danone – One of the world’s largest food companies, Danone hires warehouse workers (for $20/hour), parts clerks (for $24/hour), and product packers (for $28/hour).
- Conagra Brands – Join the Conagra Brands team as a production operator and earn over $22/hour.
- Biogen – This biotech company develops therapies for autoimmune and neurological diseases. 75% of jobs at Biogen begin at over $20 an hour.
- Merck – About 78% of Merck’s employees are happy with their jobs. QA specialists, for example, earn about $25/hour, while research scientists earn over $30/hour.
- Pfizer – 37% of Pfizer’s employees work from home. Entry-level positions also earn about $28 to $30 an hour.
- Gilead Sciences – 91% of employees here feel that their job has meaning thanks to childcare options, tuition reimbursement, and the ability to buy company stock. For example, interns here earn over $25/hour, associate scientists begin with a $30/hour paycheck, and sales specialists could earn as high as $70/hour.
- AbbVie – This Illinois-based pharma company is known to pay its employees 6% above the market. Medreps at Abbvie earn $40/hour.
- Johnson & Johnson – This global company is present in 30 countries with 130,000 employees. R&D jobs begin at $25/hour, while admin positions start at around $20 an hour.
- Amgen – This company, which has developed several cancer treatments, is known to pay its employees high with educational opportunities and technical training. Average entry-level jobs at Amgen are paid around $23/hour.
- FILMLESS – This growing production company produces video content for a TON of clients. Their video editors earn around $27 to $35 an hour.
- Meta Design – With locations around the world, Meta Design employs multimedia artists with salaries ranging from $35 to $70 per hour.
- Guitar Center – This leading retailer of musical instruments hires sound engineering technicians across the country. They earn about $20 to $55 an hour.
- Chanel – When it comes to the fashion industry, Chanel is the most desired company to work for not only because of its renowned name but also because it takes care of its people. The mid-level fashion designers here earn about $35 an hour.
- Hobby Lobby – Retail managers here earn between $27 and $36 an hour. The company’s full-time workers begin at $18.50 (a starting wage that’s way higher than many retail companies in the country).
- Crate and Barrel – Customer service managers here earn about $50 per hour.
- Walmart – Since late 2020, Walmart has increased wages for its 165,000 employees around the country. Store managers here can earn starting at $35 per hour.
- Costco – Not only has Costco a reputation for being an exceptional employer, they also pay higher than average. Their Costco mid-level associates earn about $20 an hour.
- Ulta Beauty – Purchasing managers at this makeup and beauty supply store earn about $60 an hour.
- Century 21 – As one of the biggest real estate companies in the country with over 122,000 real estate agents under their wing (as of Q1 2021), Century 21 is an in-demand company. Its real estate agents earn a minimum of $24 an hour.
- SAP America – This company’s software sales representatives earn $55 an hour. But what makes this job super sought after because they also receive up to $100k commissions.
- McDermott Will & Emery – This Chicago-based law firm is known to pay the highest in the industry. Even their paralegals earn between $22 and $35 an hour depending on experience.
- Zco – This app development firm is a frontrunner in the field and hires the best mobile app developers for over $50/hour. (Note that entry-level mobile app developers earn $30 an hour in the industry).
- Deloitte – The company has 55000 employees across 80 offices in the US. Their mid-level bookkeepers earn above $20 per hour.
Summary of 2023 Salary Adjustment Projections
While there are many, including WorldatWork that have released preliminary budget trends, at this time we find the most comprehensive review coming to us from Willis Towers Watson.
Willis Towers Watson (https://www.wtwco.com)
- In response to a tight labor market, employers are planning to up employee salaries in the biggest projected hike in 15 years, new data from Willis Towers Watson finds.
- Although it’s a new recent high, it’s not by much: Companies, on average, are budgeting a 4.1% salary increase for 2023, just above this year’s average 4% increase.
- The 2022 and 2023 salary increases are the largest since the Great Recession of 2008, according to the consulting firm, which surveyed 1,430 employers for insights in April and May.
- Nearly two in three (64%) U.S. companies are budgeting for higher pay raises than last year, while two-fifths (41%) increased their budgets since original projections were made earlier this year, the survey found.
- Less than half of companies (45%) are sticking with the pay budgets they set at the start of the year. Concerns over the hot job market—which is seeing a record number of employees leave their jobs for better opportunities—are overwhelmingly driving salary increases, with nearly three in four survey respondents (73%) citing the competitive market as their top factor.
- That’s followed by employee expectations for higher increases that are driven by inflation (cited by 46% of respondents) and anticipation of stronger financial results (cited by 28%). “Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive,” says Hatti Johansson, research director, rewards data intelligence, at WTW.
Astron Solutions’ Recommendations
The following recommendations are based on current client activity and budget discussions regarding 2023 budgeting:
- The trend is pointing to base pay budgets of 4% – 5%, with 5% becoming more prevalent.
- Clients also are establishing contingency budgets of 1% – 2% of base pay for potential additional market adjustments if the current labor availability does not loosen up.
- Clients also are budgeting for one special employee bonus of 2% – 3%, to use as a special retention bonus in the coming year.
With over four months still to go in 2022, along with the potential impact of the mid-term elections, Astron Solutions will be watching what develops, and will provide additional updates as 2023 compensation budgeting trends become clearer.
What is your organization planning for 2023? Please share some high level thoughts in the comment box below?