The pace of wages at small businesses in the United States continues to increase, as average hourly earnings in August rose 5.18 percent in August, compared to 5.03 percent in July 2022, according to the latest Paychex and IHS Markit Small Business Employment Watch report. At $30.71 an hour, average hourly earnings at small businesses have increased by $1.51 over the past 12 months.
“Wage growth is a strong indicator that inflation is rising. But rising wages can provide some respite for growing families,” said Martin Mucci, CEO of Paychecks, a payroll and human resources services software firm based in Rochester, NY.
The report draws on payroll data from nearly 350,000 Paychecks customers with fewer than 50 employees and was a joint project with global analytics firm IHS Markit, part of S&P Global.
Differences by region and industry
Regionally, the August report showed the South experienced growth in small business hourly earnings over the past 12 months, with an average increase of 5.53 percent. The Northeast is the only region with hourly earnings growth of less than 5 percent (4.58 percent).
Industrial wages
Other services (excluding public administration) posted a 7.48 percent annualized hourly earnings growth among industries in August. The one-month and three-month annual growth rates rose by 8.07 percent and 7.84 percent respectively.
By contrast, hourly earnings growth in leisure and hospitality fell to 6.37 percent for the seventh consecutive month, although the decline from July to August was not as steep as in previous months.
Small businesses stay the course
Despite the threat of a recession amid high inflation, the labor market remained tight, prompting small businesses in the US to avoid wage cuts and layoffs.
The latest Major Financial Security Index survey of 500 U.S. business leaders conducted July 7-20 found that large businesses with 500 to 10,000 employees are growing (61 percent of respondents), compared to 46 percent of small businesses with fewer than 500 employees. However, nearly half (49 percent) of small businesses consider themselves stable, compared to 36 percent of large businesses.
“Small businesses learned a lot from the 2008 recession, and many have learned that they can make adjustments during future economic downturns that will minimize the impact on wages or employees,” said Amy Friedrich, president of Insurance Solutions USA, a Des Moines, Iowa-based provider of financial benefits.
“Small businesses are devoted to their employees,” Friedrich said. “We saw that during the pandemic and I think we’ll see the same innovation and recovery in the near future if the pressures are increased.”
Satisfaction with annual income
In other recent studies on the economy and compensation, the average “holding pay” — the minimum salary respondents would be willing to accept for a new job — continued its annual trend and reached $72,873 in July 2022, up from $68,954 a year ago. According to the Federal Reserve Bank of New York’s latest SCE Labor Market Survey, released on August 22.
The average full-time annual salary earned in the last four months rose to $60,764, from $58,469 in July 2021.
Every four months, approximately 1,000 Survey of Consumer Expectations (SCE) respondents are asked for details about their current or most recent job as part of ongoing research.
Compensation satisfaction has deteriorated, with 56.9 percent of respondents saying they are satisfied with their current salary, down from 58.2 percent a year ago.
Meanwhile, respondents’ satisfaction with non-payroll benefits at their current job improved to 63.2 percent, up slightly from 62.6 a year ago.
