The Labour Market In The USA
With about 330 million inhabitants, the United States is a highly-developed country with a free market economy and has the world's largest nominal GDP and net wealth. The USA has the most technologically powerful and innovative economy in the world. Its firms are at or near the forefront in technological advances, especially in artificial intelligence, computers, pharmaceuticals, and medical, aerospace, and military equipment.
The United States has a highly diversified economy, with significant levels of activity in agriculture, mining, manufacturing and services. The service sector is the largest in the economy, accounting for about 80% of GDP. It’s the world's largest producer of oil and natural gas - and is a leading producer of coal, uranium and other minerals. The country is also a leading manufacturer of automobiles, aircraft and machinery. The United States is home to some of the world's largest companies, such as Walmart, ExxonMobil, and General Motors.
Small and Mid-Sized Enterprises (SMEs) are the backbone of the American economy. The United States' 30 million SMEs account for nearly two-thirds of net new private sector jobs in recent decades. SMEs that export tend to grow even faster, create more jobs and pay higher wages than similar businesses that don’t.
As of July 2022, roughly 158 million people were in employment. The unemployment rate in the United States has been on a downward trend since 2010, when it peaked at 10.0%.
Collective Labour Agreements In The USA
Compared to other developed countries, only a negligible share of workers in the US is covered by a collective bargaining agreement. The erosion of collective bargaining is a major factor for depressing wage growth for middle earners and drove the growth of wage inequality over the last four decades. The share of workers covered by an agreement fell from 27.0% in 1979 to just 11.6% in 2019.
Most collective bargaining in the private sector takes place at the level of the individual firm. Unlike Europe, the United States does not have sectoral bargaining between peak-level social partners. Instead, unions usually bargain with management at the enterprise level.
Wage Setting In The USA
Since the pay and conditions of most employees in the USA are not collectively negotiated, decisions are mostly set at the company and incumbent level.
The U.S. government sets a federal minimum wage, which serves as a baseline for wages across the country, but many states and cities have also established their own minimum wage laws that are higher than the federal minimum. Some industries, such as agriculture and domestic work, have exemptions from the federal minimum wage legislation. Additionally, certain sectors, such as construction and retail, have established trade unions that negotiate collective bargaining agreements with employers on behalf of their members, setting wages and working conditions.
However, the level of unionisation in the U.S. has declined in recent decades, and fewer workers are covered by collective bargaining agreements, leading to a larger role for individual negotiations in determining wages.
Our survey on Job Evaluation and Market Pricing practices in the USA, which we conducted together with WorldatWork in early 2020, showed that Market Pricing is the dominant form of job evaluation. It also shows that the use of data from multiple surveys is common amongst American employers.
National, industry and revenue salary survey data cuts continue to be preferred at higher‐level positions, while the use of local surveys is more prevalent for lower‐level positions.
US and European companies approach job evaluation differently. In our experience, US companies focus on market-based pricing to set salaries, which is based on the view that employees act as “entrepreneurs in their own name”, who are strongly involved in negotiating the terms and price of their employment themselves.
In European companies, a systematic approach to a salary structuring based on the value of a job is much more common, which is a path to more equitable wage distribution and growth, both within the organisation and for the wider economy.
Information on wage and salary increase budgets in the USA can be found in surveys such as Culpepper’s Global Salary Budget & Compensation Planning Survey.
Compensation Surveys In The USA
Compensation survey results in the United States provide insights into jobs and their salaries. Pay market data helps employers determine and design their own compensation strategy.
The market for compensation surveys in the United States is the most mature. There are the large global vendors such as Culpepper, as well as national vendors such as ERI or Pearl Meyer - and many boutique vendors such as Milliman or TheNonProfit Times that serve local or industry specific peer groups.
For us, Culpepper is the ideal market data partner for most US-based companies. They’re a leading provider and trusted source of global compensation survey data and analytics. Over many years, we’ve built a strong relationship with their team and, together, can help you find the most appropriate solution for your needs.
The gradar Solution
For companies looking to gain more clarity over their compensation, combining information from labour agreements and market data - supplemented by an internal analysis - makes a lot of sense. gradar is the tool by which to do it.
With our foundation in point-factor based job evaluation, alongside our comprehensive compensation benchmarking functionality, we allow you to establish fair, transparent pay structures under one roof in one consolidated system.
Market data from third-party compensation survey providers can be uploaded to your gradar account - or even purchased as an out-of-the-box feature. Just purchase your gradar licence and pick the data sets you want - it’s that simple!
Data for Base Pay and Target Total Compensation is then displayed on your job profiles and as a detailed report. The system uses the benchmark job code from our job matching module to display job specific benchmark data.
This is the most affordable way to perform a salary comparison against market rates worldwide - and structure effective remuneration systems that set salaries at the most appropriate level.