Zack Hutchins
Director of Communications

For Release — Tuesday, August 29, 2000

Council survey: Labor shortage means higher starting pay, faster raises
Walsh: On Labor Day 2000, it's still a workers' market

ALBANY—New York's ongoing labor shortage is prompting employers to compete for new workers by offering higher starting pay and quicker first raises, a new Business Council survey of employers' compensation practices shows.

The new survey was conducted by Compdata Surveys of Kansas City, the survey company with the nation's largest database on pay and benefits information. Survey results are to be published in Compensation Data New York 2000, which is scheduled for release Sept. 8.

"Labor Day 2000 will be remembered as a time when workers across New York had a strong bargaining position in seeking new jobs," said Business Council President Daniel B. Walsh. "Employers now must be more creative and aggressive than ever in competing for good workers."

Higher starting pay: "Last year, 26.3 percent of New York employers reported that they were increasing starting pay as a means of recruiting," said Theresa Worman, client relations manager for Compdata Surveys. "This year, 43.6 percent of employers are using higher starting pay to recruit. That's a big jump."

Earlier initial raises: Worman said the survey also shows that employers are competing for new workers by offering earlier opportunities for pay increases.

Last year, new employees performing manual or skilled labor had to wait an average of 181 days for a raise, Worman said. The average reported wait this year is 147 days for these employees. For hourly administrative employees (such as those in clerical positions), the average wait for an initial raise reported this year was 209 days, down from 224 days last year.

This trend represents a double-edged sword for employers, Worman said.

"In this competitive market, employers have a better chance of recruiting people away from their current jobs," Worman said. "But they also risk losing workers to employers who successfully entice them with their own higher starting-pay offers."

The 'boomerang employee': Worman noted that this intensified competition for workers has led to the emergence of a new concept called a "boomerang employee": one who leaves for any reason and then decides to return.

"Not long ago, such an employee would not typically have been welcomed back," she said. "In today's market, returning employees are often greeted more warmly."

Increased training and benefits: Compdata Surveys has been hearing from customers that employers are increasingly investing in employee training and new benefits as a way to create loyalty and decrease turnover, Worman said.

"There is a recognition that providing good training makes workers attractive to other employers, but there is also a belief that this investment instills loyalty and increases the likelihood that a departing employee may return as a 'boomerang employee'," she said.

Increased use of the Internet in recruiting: Worman noted that there is a steady increase in the number of employers who say they advertise jobs on the Internet. Last year, 61 percent of employers said they advertised on the Internet; this year the number is 72.4 percent.

However, Worman noted, a much smaller percentage of employers actively search the Internet for potential workers' resumes (32 percent last year, 37 percent in this year).

"Even though it's a strong market for workers, employers still expect prospective employees to come to them," Worman said.

Employee turnover rates: Employee turnover rates in all industries increased from 14.6 percent to 15.9 percent, Worman noted.

For example, in both the service and manufacturing sectors, the increase in turnover was substantial, from 20 percent to 24 percent and from 11.4 percent to 15.8 percent, respectively.

In the financial services industry, which benefitted last year from the booming economy and in which compensation often reflects market performance, turnover decreased from 21.8 percent last year to 16 percent this year.

Background on the survey: The Business Council sponsors the survey each year to collect information on pay, benefits, and related issues for New York State employers. The survey is the largest of its kind in the state with data from hundreds of organizations on more than 314,000 incumbent workers in 415 job titles.

"This book helps employers understand how their pay and benefits practices stack up against other employers in the state in just about any job title imaginable," said Tom Minnick, manager of the Human Resources Hotline that The Business Council operates to answer members' questions about human resources-related questions.

The 640-page book provides information on pay and benefits broken down by region, number of employees, and industry sector. For all job titles, the sample size is reported. All industries except agriculture and retail stores are covered.