Hefty gains are flowing down to the rookies. Many top college graduates have never had it so good.
Americans’ pay is booming, with average hourly wages climbing 5.1% in the 12 months through February. So it stands to reason that top college graduates in prestige professions would be raking it in.
Indeed they are–many to the tune of six figures. And that’s making some of their colleagues who started with lower pay scales a tad jealous.
“I’ve definitely heard a lot of disgruntlement from my fellow bankers,” Milly Wang, who was hired by an investment bank after graduating from Harvard University in 2016, told The Wall Street Journal. Her starting pay was $85,000. Now the bank gives first-timers almost 30% more–$110,000.
Among those offering $100,000 or more are major banks like JPMorgan Chase (JPM) – Get JPMorgan Chase & Co. Report and consulting firms, such as McKinsey. Some companies have raised wages more than once during the Covid pandemic.
Higher pay is raging across the economy–for rookies and veterans alike.
Target (TGT) – Get Target Corporation Report last week announced $300 million of wage and healthcare-benefit increases. Other retailers who have raised/are raising wages include Costco Wholesale (COST) – Get Costco Wholesale Corporation Report, Walmart (WMT) – Get Walmart Inc. Report, Home Depot (HD) – Get Home Depot, Inc. Report, Starbucks (SBUX) – Get Starbucks Corporation Report and Amazon (AMZN) – Get Amazon.com, Inc. Report.
Compensation is jumping in other industries as well. So far, the increases haven’t dented corporate profits much, as companies pass their higher costs on to their customers, who have kept right on buying.
But that risks an inflationary spiral where higher wages lead to higher prices, as consumers can afford to pay more. And then higher prices lead to higher wages, as workers demand more pay to be able to afford continuously rising prices.
Goldman Sachs last week lifted its inflation estimate for this year and next. “We are increasingly concerned about two main risks,” Goldman economists, led by Jan Hatzius, wrote in a commentary.
“First, the initial inflation surge might have lasted long enough and reached a high enough peak to raise inflation expectations in a way that feeds back to wage and price setting.
“Second, a very tight labor market — which now shows the widest gap between available jobs and workers in postwar U.S. history — is generating broad-based wage growth at a pace well above that compatible with 2% inflation.”
Those two factors could combine to “ignite a moderate wage-price spiral,” the economists said. They predicted the consumer price index will register an annual increase of 4.6% at year-end in 2022. That’s way below the February figure of 7.9%, but well above rates of recent years.