Former President & Chief Executive Officer, Paychex
Yahoo Finance Presents: Martin Mucci, Paychex CEO
#inflation #PaychexCEO #MartinMucci
Yahoo Finance Editor-at-Large Brian Sozzi sits down with Paychex CEO Martin Mucci to discuss wage growth, the importance of retaining employees, and inflation.
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About Martin Mucci
Martin Mucci, former President and CEO of Paychex, appeared on financial news programs in 2022 and 2023 to discuss the company's performance and labor market trends. In a March 2023 interview on CNBC's "Mad Money," Mucci noted that Paychex's stock had increased significantly since he began appearing on the show 12 years ago, and he credited the company's 16,000 employees for navigating challenges including recession and COVID-19. He also discussed government subsidies, stating that programs like the Paycheck Protection Program and Employee Retention Tax Credit had helped sustain businesses, and suggested policymakers "ought to keep an eye on something like that for the future." In earlier appearances, Mucci commented on wage growth and hiring conditions for small businesses. In March 2022, he described wage growth as "really strong" at 4.8% year-over-year, and said small businesses faced pressure from supply chain issues and inflation but had strong demand. He noted that rising interest rates benefit Paychex due to the float it carries, but expressed concern about the impact on clients and new business formation. In May 2021, Mucci attributed a pickup in small business hiring to the reopening of leisure and hospitality sectors, and said businesses were optimistic about demand but worried about finding workers. In September 2020, he reported that small business job growth had held steady after an initial rebound from pandemic shutdowns, and said the PPP program had helped many businesses continue operating.
Transcript (25 segments)
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Brian0:12
All right, joining me now is Paychex CEO Marty Mucci. Marty, good to get some time with you here. You know, I'm still reflecting a good bit on the February employment report and the lack of wage growth. I think it surprised a lot of folks. Have you seen any signs from your vantage point that this is starting to turn around?
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Martin Mucci0:30
Well, yeah, Brian, really, we're showing from a small business—these are businesses under 50 with the Paychex Small Business Index—we're showing wages up pretty strong, you know, almost five percent. Again, if you go back to just May of '21, just last year, that was two percent less. So we're about 2.7 percent average annual wage increase. Now it's almost five percent, 4.8 percent wage increases.
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Brian0:56
There's been much to be talked about and discussed on the Great Resignation. How are small businesses holding on to employees in this type of environment where we see so much job hopping?
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Martin Mucci1:09
Well, it's very difficult. You know, smaller businesses many times don't have the benefit plans, they don't have retirement plans, they don't have as many opportunities to have work flexibility either. So they're doing their best. They're raising wages, they definitely are seeing the wage rates, you know, as I said, almost close to five percent, and they're trying to add things like retirement plans and those things that are really attracting and retaining their employees. But it's a little bit harder for the smaller businesses who don't have quite as much flexibility.
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Brian1:37
When I hear five percent wage growth, at first that sounds good, but if you drill into it, look at the consumer price index that is now nearing 10, if not higher for some of the categories in there. Essentially, those wage gains are being wiped away. What are your thoughts on that?
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Martin Mucci1:51
Well, yeah, that's true. You know, what's really interesting also, if you go a little bit deeper into our data, we show it's different by generation. So millennials, for example, you know, those around 26 to 40, 41 years old, they're seeing about an 8 percent wage increase in general. The Z generation, the youngest, of course, are seeing the minimum wage, they're seeing 13 percent. Where you're seeing kind of baby boomers, that group, more around two to three percent. So it's very different by generation because, of course, the millennials in that age group are really the ones that are probably moving around the most and taking those increases as they jump from job to job.
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Brian2:28
Any words of wisdom to that millennial crowd, Marty? They are leaving jobs, they're not staying in those jobs for much longer. I mean, to gain that experience, it seems to be one year, two year, at max three years, and then they're out the door already. And then they have a LinkedIn profile with 10 jobs on it.
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Martin Mucci2:48
Well, it's a very different generation, certainly than mine. But I think, you know, it's about what the experience is for you as an employee. We see that in our own employees. You got to keep it a fresh experience. You got to work through their career development. They want to know where they're going. And if you can offer those opportunities to move around and continue learning and growing in your career, then you're going to keep those people for the most part. Wages certainly being a part of that, but it is very important to them that they have workplace flexibility, whether that's hybrid working and so forth. But also, are they continuing to learn and grow? If you do that, I think you'll keep a lot more of them than sometimes we're seeing today.
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Brian3:26
Is keeping talent one of your most important priorities as CEO of Paychex?
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Martin Mucci3:32
It really is, Brian. You know, it's so important, particularly when you bring great people in and you build their experience level. They get to know the company, they know our clients, they know how we're growing as a business, and they reflect our values as well. So it really is important to retain the best people, and we're working hard to do that with all the things that I've mentioned. You know, we're working very hard. Things change constantly. You got to keep a good, close pulse on your team and find out what's important to them, and then make sure you're changing as a company as well.
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Brian4:00
How are you doing on the wage front?
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Martin Mucci4:03
We're doing pretty well. We're seeing probably that same kind of wage increases. You know, as we look at it, some jobs are much larger increases because you're trying to keep those. You know, when you look at the IT development, the security, the infrastructure on the IT side, that certainly is demanding more wage increases to keep people. But also, again, you have to give them more than just wages. That could keep them temporarily. Is there a place for them to grow and be promoted? And you know, with Paychex, we're now at over 16,000 employees across the country and a little bit into Europe. We work hard to try to move people around, give them new opportunities. That plays a very important role, particularly for that millennial generation.
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Brian4:41
Where are you seeing, going back to your survey and your findings on jobs, what states are hiring the fastest?
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Martin Mucci4:47
Yeah, you know, it continues to be really the South and the Southwest. North Carolina is number one. You have Arizona in there as well. You know, it's the states where people are migrating to. You're seeing that, everyone knows that more people are migrating to the South and the Southwest. And you know, that's where the people are, so you're seeing the best job growth because there is a limited supply. Where you have more supply, you're getting better job growth, and those are the states that are doing it.
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Brian5:14
Well, if those jobs are growing, does that also mean they're seeing the fastest wage growth in those states?
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Martin Mucci5:20
You know, not always. In the South, we tend to have a little bit lower wages. I think it's just historically where their minimum wage has been, and therefore the wages are a little bit lower sometimes in the South. You're seeing the highest wages on the coast, more on the West Coast, and of course in the Northeast. Some of that is tied to taxes as well, of course, and so you're seeing a little bit higher wages there and a higher wage growth. But the South, probably a little bit lower wages, but there's more opportunities.
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Brian5:49
It is interesting in our world of business news, we are now talking seemingly every day about a recession, and that doesn't fit too well just listening to what you're saying. And you're discussing our hourly earnings growth, according to your survey, up for 10 straight months, unemployment level around record low levels. Do you see any signs of recession?
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Martin Mucci6:09
Well, we don't at this point. You know, it certainly has that concern. One of the things that we've seen in consumer sentiment—not in ours, but in the national numbers in consumer sentiment—is that it's up 30 percent. The feeling that someone is going to be worse off financially in the next year is up 30 percent. That's like the highest number of people since the mid-1940s according to the survey. And it's very interesting that you think that could cause things where people start spending less, they get a little bit more concerned about what the market's going to do, are they going to get enough wage increases to offset inflation, what's going to happen, where's inflation going to hit them. So that's a little concerning, that could have a little bit of a pullback on spending, which could cause a little bit of slowdown in business expansion and formation. We'll have to see how that happens. But right now, things are still going pretty good. Wages are up and job growth is still strong.
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Brian6:59
I just want to flush this out more because you took over as CEO of Paychex, I believe, in 2010, not far removed from the Great Financial Crisis. Do you see any comparisons to what is happening now or what might happen in the economy later this year to those periods?
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Martin Mucci7:15
Not really at this point. I don't see that. I see, you know, you're always concerned about inflation, but it's still trying to figure out how much of the inflation piece of this is temporary or is it supply chain and so forth. There is a huge demand, for example, for housing, right? And so when you see that, you know that there's going to be a lot of jobs in construction. But right now, construction is hamstrung with the lack of supply. They can't get lumber, they can't get other supplies, so that's slowing construction job growth down. But the demand is there. So when you see the demand is there for these kind of things, I think that can still drive a lot of job growth, wage increases, and more income to people. And so right now, I think there's still a lot of hope there that if we can get supply chain fixed, that will continue to drive the economy.
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Brian8:00
You know, and part of the reason why we're even having this discussion on recession is because we're now in an interest rate hiking cycle period. You have seen these periods before. Do you worry about it as a leader of a company like Paychex?
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Martin Mucci8:10
Well, we do. Now, Paychex also benefits from higher interest rates because we withhold taxes and then pay them for our clients. At any one time, we hold about four billion dollars worth of funds. We earn interest on that. There hasn't been any interest for many years, or very much of it, and so we'll benefit to some degree from that. But overall, you worry about the impact on things like housing. Will that slow down housing because mortgage rates are higher, etc.? Will that impact our clients from the fact of having access to money? Don't see that yet, and certainly not at the lower interest rates. You know, I also grew up at a time when, coming out of college, mortgage rates were 13 percent in the early '80s. So it doesn't feel that bad to me yet. But the people who have seen almost no interest rates or very low interest rates, it's a little concerning. So we'll have to see how it comes out, but right now, I don't think it's too concerning.
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Brian9:05
You're giving me flashbacks. My mom always likes to tell me when she bought her first house, her mortgage was like 20 percent or something like that. It's, to your point, as someone who has not seen those rates before, it's almost hard to believe.
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Martin Mucci9:18
It is, and it will have some impact, right? If people are trying to look at homes now and the kind of higher prices that are out there for housing, you know, now you throw a higher mortgage rate on there, that's going to take some people out of the market, which is disappointing. So we'll have to see how that goes. But I do think that, you know, I don't think the interest rates will get that high that it'll cause that big of a problem. But it's all relative, right, to what you're used to.
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Brian9:42
I think at the rate I'm going, I might be paying 20 percent interest on a little shack, a million-dollar shack down the corner of my block at the rate I'm going here. We'll leave it there. That's a discussion for a different day. Paychex CEO Marty Mucci, always good to get some time with you. Stay safe. We'll talk to you next spring.