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Will Wage Pressure Persist in 2005?

Posted By Barry Ritholtz On September 12, 2004 @ 6:29 am In Finance | Comments Disabled

Cst_logo_300 [1]

“Hoping for a big boost in pay next year? Forget about it.”

That’s the thinking of the Chicago Suntimes [1], which noted that base salary increases remained at record lows this year, with only slight improvements forecast for 2005, according to the latest annual survey from Hewitt Associates.

Base pay increases nationally for 2004 were consistent with 2003. Union hourly workers averaged 3.1 percent increases, salaried exempt employees 3.4 percent, salaried non-exempt 3.3 percent, non-union hourly workers 3.3 percent and executives 3.7 percent. Next year, pay increases are expected only to edge up slightly, according to Lincolnshire-based Hewitt’s survey of 1,185 companies.

The midwest region — swing states and all — are forecast to lag the national numbers in most employee classifications, mostly due to “the impact of the manufacturing industry here, which has struggled.”

The continued anemic economic recovery is keeping a lid on raises. “The outlook on the part of companies is they’re still not sure what the economy is going to do, and having emerged from two tough years of cost reductions, organizations are not excited about adding to fixed costs now,” noted Ken Abosch, a business leader with the human resources outplacement and consulting company.

Here’s a larger excerpt:

” Given that pay is typically the No. 2 or No. 3 expense for companies, executives recognize that “by holding the lid on these numbers they are making a significant impact on profitability,” Abosch said.

The 2005 forecast increases are a drop from 2001, when base salary gains were as high as 4.3 percent for salaried exempt employees, 4.2 percent for salaried non-exempt workers, 4 percent for non-union hourly workers and 4.5 percent for executives. Abosch doesn’t see a return to those days on the horizon even after 2005. “We believe the days of mid 4 percent increases are probably a thing of the past.”

Instead he expects employers to turn more to variable pay or incentive programs tied to performance. Seventy-eight percent of companies have variable pay programs today, up from 59 percent in 1995. Employers also are spending more money on the programs. Such programs are averaging 9.5 percent of payroll this year, up from from 3.8 percent in 1991, and are projected to rise to an average of 9.9 percent of payroll next year.

“There’s a good-news, bad-news scenario,” in the latest survey, said Abosch. “The bad news is people aren’t likely to see their base salaries growing as quickly as in the past. The good news is companies are putting significantly more money on the table in terms of bonuses, so the total opportunity isn’t as bleak for employees as it might seem.”

I am none too excited about the economy in 2006 . . .

Source:
Only slight pay increases seen in 2005 [1]
FRANCINE KNOWLES
Chicago Suntimes, September 9, 2004

http://www.suntimes.com/output/business/cst-fin-salary09.html


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