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Are Increases in Hourly Wages a Bad Thing?

With the colder than normal winter finally coming to a close, the summer hiring cycle has begun and for many employers this is the moment they have been dreading. The release of the May jobs report saw a moderate increase in the average hourly earning of .3% from last month with an increase of 2.3% from last year. This means higher payroll costs for many employers. However, these higher costs may not necessarily be a bad indicator of things to come. In fact, they may be good.

An increase in hourly earnings is considered by many economists to be a good sign of economic growth. It implies that the labor market is “tightening up” as the unemployment rate falls, meaning that the number of available employees is decreasing. This causes an increase in competition for workers resulting in an increase in wages. (Kristen Scholer). Economic growth is a good thing for the hospitality industry. As more people get employed and current employees see their wages increase, the amount of disposable income for those people rises. This disposable income is then spent on leisure activities, such as hotel stays and short getaways.

While of course there are many other factors that go into determining whether or not the economy is doing well, an increase in hourly earnings (or increased wages that hospitality businesses are having to pay their employees) should not necessarily be viewed as a bad thing. And while it is too early to tell for certain, we can hope that it is an indicator of good things to come. The increase in payroll costs has the potential to be off set by the increase in customers looking to get away and spend the new disposable income they have recently acquired.


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