As we’ve mentioned in previous articles, the current labor shortage is tough for everyone. But some industries are being hit much harder than others. Several businesses have already raised wages in a bid to attract more workers. Yet, according to Morgan Stanley, certain sectors are still likely to see additional pay hikes as the shortage lingers.
Morgan Stanley identified which sectors are most likely to raise wages first by analyzing companies’ earnings-per-employee, estimated margins, and historic wage growth. The sectors at the greatest risk of wage hikes shared a handful of characteristics. Many were among those hit hardest by the pandemic and related lockdowns. The top 10 sectors mostly consisted of service jobs and retail positions. Morgan Stanley stated:
- The hotel, restaurants, and leisure sectors are most likely to raise pay.
- Independent power and renewable electricity businesses are the least likely to hike wages.
Morgan Stanley also expects a larger share of sectors to drive wages higher. While 64% of industries saw above-trend pay growth since March, that share grew to 93% in April and reached 79% in May. A deeper look at industry-specific data shows wage pressures growing in middle- and high-wage industries, marking a departure from trends seen just before the pandemic. Most industries’ pay hikes have been dwarfed by stronger inflation through spring. Only 21% of sectors saw pay climb faster than the Consumer Price Index in the three months through May, Morgan Stanley said. For workers to actually benefit from the faster-than-average pay growth, businesses will need to keep raising wages after the anticipated cooling of inflation.