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Someone Is Getting a Raise — but Perhaps Not You

Contrary to the sour economic mood, employers are giving salary increases averaging 3.1 percent in 2009, while only 10 percent of employers are freezing salaries of their workers, surveys conclude.

September 16, 2011
Related Topics: Compensation Design and Communication, Retention, Latest News
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To the employees who thought 2009 was the year of the pay freeze: You were wrong, at least so far.

Contrary to the sour economic mood, employers are giving salary increases averaging 3.1 percent in 2009, according to a survey of 1,000 employers by human resources organization WorldatWork. Only 10 percent of employers are freezing salaries of their workers, both WorldatWork and Hewitt Associates report in separate surveys of employers.

Still, wage growth is slowing and is expected to slow further. Companies projected lower salary increases in December than the 3.8 percent increase they had anticipated when WorldatWork surveyed companies in April about projected salary increases for 2009. As companies revise their budgets, they are lowering raises. Still, it’s better than nothing—which is what about one in 10 employers say they will give non-executive-level employees this year, according to the study.

“Organizations are scaling back, but there seems to be a very clear effort to reward employees,” said Alison Avalos, practice leader for Scottsdale, Arizona-based WorldatWork. “If you have a job … you’re in a good position to receive a pay increase this year.”

In another survey, Hewitt Associates reported that 50 percent of U.S. employers are cutting salary increases for 2009. Perhaps more important, 35 percent are laying off workers and 39 percent have instituted hiring freezes.

Other economic indicators paint a much gloomier picture: The Dow Jones industrial average has dipped to below 8,000 from a high of 14,000 in October 2007; the Consumer Confidence Index dropped to another historic low in January, the Conference Board reported January 27; and the Bureau of Labor Statistics also reported last month that in 2008, salaries increased an average of 2.6 percent, less than the projection for 2009 by WorldatWork.

Conference Board economist Ken Goldstein said changes in wages often lag behind declines in the economy and lost jobs.
 
“With a loss of half a million jobs in November and again in December, and very likely in January, wage growth will slow even more over the next few months,” Goldstein wrote in an e-mail.

According to WorldatWork, executives were more likely to take a pay freeze. About 17 percent of employers surveyed said executives would not receive a raise in 2009.

Across industries and regions, businesses reduced the raises they originally planned to give employees. Half the businesses responding to the survey said their company’s financial performance was worse than in 2007 and that they anticipated a decline in business this year.

Contrary to expectations, hard-hit industries such as manufacturing and finance were no more likely to reduce payouts than other industries, despite receiving federal bailout money.

“It seems those industries are no more affected than any other,” Avalos said. “Everyone has scaled down to the same degree.”

Manufacturing companies said in April that white-collar workers would receive a 3.8 percent raise for 2009, equal to the national average. In December, when the latest survey was taken, the industry reported that white-collar workers would receive an average 2.9 percent raise.

Financial companies projected in April that they would increase salaries for white-collar workers an average of 3.9 percent; as of December that number was 3.2 percent, in both cases just above the national average.

Depending on how one looks at it, the small percentage of workers who had their pay frozen will not see their overall buying power drastically reduced. The Consumer Price Index, a major indicator for gauging inflation reported by the Bureau of Labor Statistics, rose 0.1 percent as of the end of 2008 compared with a year earlier, as the drop in fuel prices brought overall costs down.

—Jeremy Smerd

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