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Some Pittsburgh-area employers lift pay in the face of inflation. But is it enough?

Pittsburgh gas station
Gene J. Puskar
A man pumps gas at a mini-mart in Pittsburgh on Wednesday, June 15. Record fuel costs drove inflation to 8.6% for the 12 months ending in May.

With the inflation rate at a 41-year high, some Pittsburgh-area employers report they’re paying more to help workers manage the rising cost of living. But amid mounting economic uncertainty, the extra money generally hasn't closed the gap.

Carnegie Mellon University announced two weeks ago that it would give employees one-time $1,500 payments. Staff at the Pittsburgh Theological Seminary received bonuses this month that equal between 4% and 6% percent of their annual salary. Meanwhile, roughly 45,000 Pennsylvania state employees were awarded up to $1,000 in retention pay.

The bonuses build on a yearlong trend of rising pay in the U.S. Amid persistently high inflation, workers will continue to demand more, predicted Carrie Haglund, the Pittsburgh branch director for the professional services staffing agency Robert Half.

“As individuals look back at their budget for the year … they're seeing a number of costs go up – housing prices, gas prices, personal goods, travel expenses,” she said. “And so I think individuals are trying to figure out what they need financially to support their personal living situation.”

Her branch covers an area that extends north from the West Virginia border to Mercer County. Spilling into Ohio and stretching east to Somerset County, the office schedules about 200 interviews a week for job candidates.

Due to ongoing labor shortages, she said, “job seekers have more options today than they've ever had before, which also gives them more negotiating power than they've ever had before.”

But wage growth nationally hasn't kept up with inflation. In May, the consumer price index rose 8.6% over the previous year while wages grew by just 5.2%, according to the U.S. Bureau of Labor Statistics.

“There are a lot of people who … don't get a pay increase until they actually switch jobs or until their annual pay adjustment comes around, whereas inflation can change on a moment's notice,” said Daniel Zhao, a senior economist at the jobs site Glassdoor. He noted that supply chain disruptions, such as ones stemming from the war in Ukraine, have triggered sharp price hikes.

Pittsburgh Theological Seminary President Asa Lee said his organization studied its budget for a few months before deciding in May to award bonuses to employees on top of their annual raises. The nonprofit had run a surplus the prior year of just over $1 million, he said, thanks to its endowment's performance, government grants, and pandemic-related cost savings.

“We felt comfortable that we could afford this [extra pay] safely and be able to meet our other obligations with cushion remaining,” he said. And he added, “There was a lot more strain in recent years on the workforce, and the inflationary pressures certainly would have added to the stress of that.

“And so this was an attempt to say, ‘Thank you for the work you've already done, but also thank you for the work you're doing because that's going to be key to our future going forward.’”

Lee noted that the theological seminary instituted a salary and hiring freeze at the outset of the pandemic while cutting the pay of senior-level administrators. The school restored regular pay rates last June, but employees soon began to complain about the pressures of inflation, Lee said.

While the seminary sought to provide “meaningful” relief with last month’s pay increases, he said it couldn’t fully shoulder the burden. “Theological education has been in flux for the last, some might say, 20 years. … And it's reeling under the weight of the decline of American church attendance [and] the changing face of higher education in terms of hybrid and online education.”

“And so with all that uncertainty,” he said, “we didn't want to saddle the budget with an exponential increase in salaries year over year.”

Haglund noted that one-time bonuses offer one way to hedge against such unpredictability. Employers can also offer extra benefits in lieu of higher pay, she said.

But if workers want more cash, wage data suggests they should find a new job. Last month, the Federal Reserve Bank of Atlanta reported that pay rose by 6% in the past year for job switchers, compared to 4.5% for those who stayed in the same position.

“When people switch jobs, that's when they have the most leverage because their new employer is coming to them and saying, ‘Hey, we really want you.’ And sometimes their old employer is saying, ‘Actually, we realize that we really need to keep you as well,’” Zhao said.

“So I think at that point of being able to compare your old job and your new offer, that's often when workers have the most leverage to negotiate a larger pay increase.”

In fact, more than half of company leaders have noticed that new hires tend to earn more than more-tenured staff, according to a survey Robert Half conducted late this winter. About 60% of those executives said they regularly bump pay for longer-time employees to align with market rates.

One in every three workers, meanwhile, reported that they had not gotten a raise in the previous 12 months. But nearly two-thirds said they plan to ask for one this year, with 30% of them citing the higher cost of living.

“I think employers and employees should be prepared to have compensation discussions,” Haglund said. “We are just seeing this taking place on a daily basis. And if employees … or employers are not prepared to have those conversations with one another, I feel like they're going to be at a disadvantage.”

She advised employees to take stock of why they think they deserve more money before asking for it and to ask how they can improve their performance. Employers, meanwhile, should make sure workers feel valued financially to avoid costly departures, she said.