How Cape Fear governments use pay hikes to fend off vacancies, inflation

One after the other, local governments in the Cape Fear have announced raises for their employees in recent months.

First came the city of Wilmington. Then New Hanover County. Brunswick County and the towns of Wrightsville Beach and Carolina Beach followed, citing high vacancy rates for job postings, a rising cost of living and increased competition as reasons for the raises.

The pay raises and restructured salaries were based on months-long market studies that compare area wages and benefits with other similar markets.

On a national scale, wages of government employees lag behind their private sector counterparts, according to Mouhcine Guettabi, the area's regional economist and an associate professor of economics at the University of North Carolina Wilmington.

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It's not surprising local governments are feeling pressure to raise pay, Guettabi said. Since emerging from the worst of the COVID-19 pandemic, the U.S. labor market has tightened as businesses reopenings drove up demand for employees while the supply of workers remained low.

"The fastest way to resolve a worker shortage is to raise wages," Guettabi said.

That's because higher wages either can pull someone not currently working into the job market or draw them away from a competitor.

Wilmington leaders hope raising wages will do just that.

Several city departments have struggled with unprecedented vacancies and hiring lags. Wrightsville Beach, too, has dealt with employee shortages for months.

Government wages often aren't as flexible as those in the private sector because municipalities often adhere to stricter guidelines and budgets, which makes it difficult to to keep employees from going elsewhere for more money.

"Typically, wages in local governments and state governments are very well defined," Guettabi said. "You don't have the discretion to just offer a 20% or 30% raise."

Still, government jobs can offer more benefits and stability than those in the private sector.

Guettabi, for instance, refers to government wages as "stickier" than money from private employees. That means wages aren't tied to the economy as closely.

An economic collapse won't necessarily change government wages, but neither will an economic expansion. Wages often remain stable regardless of the economy, Guettabi said.

Inflation and a rising cost of living could be another factor driving municipalities to give employee raises, Guettabi said. Carolina Beach along with Brunswick and New Hanover counties cited market increases and the cost of living as factors that played into their wage hikes.

As people start to run out of savings and stimulus money accumulated during the pandemic, Guettabi said he expects to see an end to the worker shortage in the Cape Fear region, which could put "downward pressure" on wages, he said.

Ultimately, local governments and private employers alike are faced with the challenge of balancing a need to fill positions and retain employees -- with offering higher wages and benefits.

"At the end of the day, you have to pay for the increases, and can you find the money to do it quickly enough to compete? And can you raise the wages at a fast enough pace?" Guettabi said. "That's a big question."

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Reporter Emma Dill can be reached at 910-343-2096 or edill@gannett.com.

This article originally appeared on Wilmington StarNews: Wilmington-area government employees see pay raises, more competition