Labor Day 2022: Smaller paychecks get bigger raises

If Hollywood were to make the movie “Revenge of the Small Paychecks” for Labor Day 2022, it would be a horror film for bosses.

An intriguing plot line inside this year’s job market drama is that workers making the least are getting the second-biggest pay hikes among  41 job niches tracked by the Federal Reserve Bank of Atlanta.

It’s a surprising outtake from the pandemic era’s wild job market, which has swung from unprecedented layoffs to an overabundance of “help wanted” signs.

The “Revenge” script sees employers, facing historically few job seekers, forced to pay up for all sorts of talent. It’s just another managerial nightmare amid wildly inflated business costs. Yet the stars in this storyline are getting meager paychecks.

You don’t need a trusty spreadsheet to preview this plot twist. Simply drive through any major shopping district and see all the “we’re hiring” placards luring workers with seemingly ever-rising salary pitches.

It translates to the worst-paid employees getting record-setting 7.3% wage boosts in the year ending in July — far more generous hikes than the nation’s average 5.5% pay increase. And it’s twice the 3.6% raise this low-paid group got over the past 10 years.

These raises stand out, even more, when you look at the other end of the salary spectrum.

The highest-paid workers only got 3.8% raises through July — the second-lowest pay hike of the 41 categories. It’s only one-third higher than the 2.9% average increase for these highly compensated employees in the past decade.

Or simply stated: The lowest-paid workers have never had a larger advantage in raises over their better-paid co-workers in the 26 years such pay patterns have been measured.

Slim pickings

One peek at unemployment rates shows an unnerving lack of choices is upsetting employers in a hiring mood.

Look at California’s joblessness, for example. It fell to 3.9% in July, the lowest in records dating to 1976. Hey, that’s even below Texas’ joblessness — a first in 16 years.

And California is one of 26 states setting new record lows for joblessness this year. (Texas didn’t make that list, FYI.)

Such slim pickings of job seekers forced California bosses to enhance wages in the state’s lower-paying job markets. Let’s look at quarterly pay starts for 2022’s first three months in the state’s 28 large-county job markets.

Workers in the seven counties with the lowest weekly wages — Tulare, Merced, Butte, Fresno, Kern, San Joaquin and Riverside — had average pay of $1,005 a week. That was up 3.9% in a year.

Then look at the highest-paying counties — Orange, Contra Costa, Marin, Alameda, San Mateo, Santa Clara and San Francisco — where wages averaged $2,380 a week. Pay fell 2.8% in a year. Yes, fell.

Note that California’s average $1,644 weekly wage as of March — the fifth-highest among the states — was up only 1% in a year, the nation’s smallest increase.

Less gets you more

The lower the pay, the bigger the raise.

The nation’s pay deserts were found in Mississippi, West Virginia, Idaho, Montana, South Dakota, Oklahoma, New Mexico, Kentucky, South Carolina, Louisiana, Wyoming and Arkansas. Workers there had average weekly pay of $1,024 as of March, 25% below the national norm.

Yet this group saw its wages rise 8.4% in a year.

Conversely, the highest places for pay — Texas, Minnesota, Maryland, Colorado, Illinois, Washington, New Jersey, California, Connecticut, Massachusetts, New York and the District of Columbia — had average pay of $1,607 a week, 17% more than the typical American.

But the best-paid states averaged only 4.9% raises.

Bottom line

Consider who’s getting the nation’s largest raises this year.

No. 1 among the Atlanta Fed’s 41 job slices were workers aged 16 to 24 with wages up 12.8% in a year. Complain all you want about “today’s youth” if you must, but March’s pay increase was nearly double this youthful cohort’s 6.8% average raise of the past 10 years.

And why is everybody quitting? Forget all the psycho-babble about new-age thinking surrounding work-life balance. It’s simple cash flow.