Employers boost wages amid worker shortage

Average pay rose 1.5 percent between July and September, the largest increase in 20 years, the Labor Department reported Friday. Battling a worker shortage, employers in retail and food industries are trying to attract applicants with bonuses and higher wages. Costco will pay new employees $17 per hour starting Monday, and McDonald’s plans to raise prices to offset a 10 percent increase in hourly pay rates.

What’s behind the increases? Rising inflation combined with a worker shortage contributed to increasing wages as millions of people quit their jobs to seek better pay. The glut of open positions allows workers to be picky. Inflation is up by 3.6 percent compared with last year, excluding fluctuating food and energy prices. People who quit in September are reaping the rewards: Job-switchers saw their pay rates go up 5.4 percent on average from last year, according to the Federal Reserve Bank of Atlanta. People who remained in their jobs received a 3.5 percent boost on average.

Dig deeper: Listen to financial analyst David Bahnsen discuss declining workforce participation during the pandemic on The World and Everything in It podcast.