Illinois workers at private companies ended 2023 on a high note as the annual median pay in December jumped 5.4% compared to December 2022, according to ADP Research Institute.
The increase is a shift that’s expected to continue in Chicago thanks to the city’s impending subminimum wage increase in July and an increase to the state’s minimum wage that kicked in Jan. 1. Meanwhile, the state’s median annual pay was $58,400, just short of the national number of $58,700, according to ADP.
Annual pay across the nation increased 5.4% in December for workers who stayed in their job, but it’s lower when compared to the previous month, which saw a 5.6% increase. ADP said the month-over-month decline continues “a deceleration that began in September 2022.”
Nationally, private employers added 164,000 jobs in December, according to ADP. The research institute releases a monthly employment and pay insights report based on data from private employers. The Thursday report comes before the Labor Department’s release on Friday of its employment report for December, which is more comprehensive as it includes government workers.
“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” ADP Chief Economist Nela Richardson said. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”
The jobs added were largely in the hospitality and leisure sector, “a brighter spot in the overall data,” Richardson said.
But Richardson said small business hiring trends are important to focus on.
Some businesses, like Sip & Savor coffee house, which has five locations in Chicago, cycle through new hires often.
“We’re constantly hiring because we’re constantly getting rid of people,” Sip & Savor CEO Trez Pugh III said. “I have this saying, ‘Everybody wants a job, nobody wants to work.’”
Because of the revolving-door pattern of hiring trends in the service industry, creating a work environment where people want to stay is vital, Pugh said, adding that he provides employees bonuses when he can.
While some pay bumps represent a snapshot of a moment in time, Richardson said Chicago’s upcoming subminimum wage increase for tipped workers will likely spur a more consistent, sustainable wage growth in the city. Much of the increase across the state and country affected hourly workers at the lower end of the wage scale.
“We’ve seen that most of the wage growth has been at the lower end of the pay distribution,” Richardson said. “So for hourly workers, those increases at the state and metro level ... did get a bump for overall pay growth.”
But the city’s wage boost could strain businesses that are struggling to balance costs, Pugh said.
He added that a minimum wage increase isn’t always taken at face value on the business side. For example, he said, a $17 minimum wage could cost the business closer to $22 or $23 because of taxes and other fees associated with the increase.
“I could see some businesses going out of business because of the wage increases, a lot of businesses are holding on by a thread right now, especially brick-and-mortar,” Pugh said.
