WAGE COMPRESSION – WHY YOU NEED TO UNDERSTAND THIS CONCEPT
by J.A. Keith, DVM, MBA, MEcon, CVJ
I’ll bet you didn’t know that the cost of pill vials went up 31% the first week of October. You probably have noticed the rise in everything else, however. Petroleum is now hovering around $80/ barrel and we
are seeing it at the pump with a substantial increase within the last two weeks of this writing. In fact, the Federal Government announced this week that consumers are now spending on the average of $170 more every month for basic goods and services (electric, food and groceries) compared to just a few months ago1
.
So why do veterinarians need to understand that inflation is rising fast and the stock market is extremely volatile? How can that possibly affect my historic revenue gains in the last 18 months? Well, it is and has been for some time now. Have you tried to hire a new employee or doctor in the last two years? Are you paying attention to your Cost of Goods (COG)? While I could write for days on the impacts our practices are facing due to inflation, let’s focus just on employment.
Most of you have never even heard the term ‘Wage Compression.’ Historically, you didn’t need to worry about it. But now, it is front and center for every practice. Also known as ‘Pay Compression,’ it refers to when employees who have been in a job for a long time are earning close to the same income as new hires for the same job. With Compression, there is very little latitude for tenured staff members with regard to experience, skill level, or seniority. We know that some members of Congress have been pushing the man- datory $15/ hour minimum wage for some time now. Tis is more political posturing than either logical or sound economic policy. Market forces and skill level/education should determine worker pay.
I took a photo in High Point, North Carolina, a month ago of a McDonalds sign advertising a need for new employees. Te starting wage - $15.50 – $18.00/hour. How many of us are paying that amount for new employees? How many of our technicians, assistants and receptionists make that NOW? I am not dis- paraging McDonald’s workers, but rather showing what we are competing with. It is very difficult to even get quality people to apply for a job in a veterinary office. Normally, when my office has an opening, we have 30-40 applicants. We have had an opening for four months and had a total of FIVE people apply. So, what does all of this mean?
As we increase the starting wage it becomes closer to what our current experienced staff are earning. Tis creates erosion of morale, disengagement, complaining and employee turnover. Yes, the staff generally have an idea of what their fellow employees are earning. It is easy to understand your senior employees’ point of view. And, I agree with them. “Why should an unskilled person who just joined the team make $1.00 less than me when I have been here 10 years?” Te strategy to resolve this is hard but necessary, and you first have to understand that this is happening.
Te reflexive antidote is to just pay the historic starting wage you have always paid for new employees. Good luck with that – you are competing (poorly) with the fast-food industry for what are most likely average, or below, skilled employees. I believe you want more than that. I certainly do. Additionally, you will find that you will get exactly what you pay for from employees. You need to reconsider your starting wage and potentially increasing the income of your current staff members.
Continued on pg. 13 Don’t Miss Out! Update your KVMA contact information!
Te KVMA communicates electronically with its membership. It’s faster, cheaper, and more efficient to do it this way, not to mention far more versatile. Please, even if you are absolutely sure that the KVMA has your proper email address, take a moment to double check by logging in to www.KVMA. org and checking your Member Profile in the Member Portal. You can make any necessary changes, to email or any other pertinent information, right on the spot and be connected with your colleagues once again.
12 KVMA News
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44
