This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

April 7, 1999

Major Wage Inflation Won't Happen

269 days until January 1, 1999

With the widespread labor shortage, there has been a lot of talk about an inflationary push on wages. Based on the familiar supply-and-demand curves, too few workers to fill all the vacant positions should cause a competitive increase in wages.

The increases have been seen, but they're moderate. Employers, highly sensitive to profit pressures, are using alternative methods to attract and hold the people they need. In the financial area, signing bonuses, retention bonuses, and performance bonuses are becoming more popular. Stock options are used increasingly—they're "sexy" and they emphasize all-important shareholder value.

Incentives of all sorts are finding their way through the employee ranks. They're not limited to salespeople anymore. Everyone whose job can be measured—individually or as a group—can be incentivized. Profit-sharing plans, stronger insurance programs, 401(k) plans, and similar rewards are being used to sweeten the pot. Managers are even being given incentives for their employee retention levels.

Employers are developing alternative "compensation" methods. They're recognizing that today's employees are looking for more than just money. Family centeredness, educational opportunities, meaningful work, flexible hours, increased responsibilities, childcare, time off, and other values are getting more attention.

Many employers can't pass through the cost increases of increased wages. Today's environment is too competitive. Instead, employers must find ways to become more efficient and cost-effective. They must train their managers and supervisors to be more people-conscious to build their levels of employee retention to reach workforce stability.

Bottom line, astute employers will seek ways to generate solid profits using fewer people with greater longevity. Those people will be well-compensated, but their packages will include much more than money. The drive will be to keep costs under tight control.

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