Wage Increases for U.S. Workers Not Keeping Up With Inflation

Payscale

Despite the weak economic recovery, workers are likely to see a pay raise next year -- though a modest one -- a new survey of employers suggests. Employees can expect, on average, base pay to rise 3 percent next year, according to the 2011/2012 U.S. Compensation Planning Survey, released this week by Mercer, a human-resource consultancy.

That modest rise is up slightly from gains of 2.9 percent this year, and 2.7 percent in 2010. Employees at the top of their game, however, can expect to do better, with an average expected increase of 4.4 percent. In more concrete terms, a worker making the current average weekly wage of $788.56 would see a raise of about $24 a week, raising annual earnings to $42,335 from $41,005, based on June data from the Bureau of Labor Statistics, the most recent available.

According to the Mercer survey, nearly all employers -- 97 percent -- plan to increase base pay next year. Further, half of employers polled said they plan to award higher increases next year than in 2011 because of anticipated labor shortages and greater competition among employers for skilled workers.

"Employers realize that in order to hang onto their best employees, they're going to have to reward them," Catherine Hartmann, a principal with Mercer's Rewards consulting business, says in a statement accompanying release of the survey's results. "[And] base pay is still the most important element of the employment deal."

Mercer's survey includes responses from more than 1,200 medium and large employers across the country that employ some 12 million people.

The anticipated 3 percent rise in wages isn't sufficient to keep up with the pace of inflation, notes Ibraiz Tarique, professor of human resources management at Pace University's Lubin School of Business in Manhattan. In the 12 months ending June, consumer prices rose a non-seasonally adjusted 3.6 percent, the BLS reported earlier this month.

Overall, Tarique expects that few employers will grant "good" raises. "I don't think companies can afford to increase base pay," he says.

Moreover, workers will have to work harder to earn more. Tarique expects companies to broaden "pay-for-performance" programs that tie wage increases to output. He also expects that in lieu of raises employers will offer additional forms of non-monetary compensation, such as tools to help workers balance their work and personal lives.

The wage increases calculated by Mercer may appear modest, but they are much more optimistic than similar data compiled by PayScale.com.

PayScale, which examines employee compensation at private employers of all sizes, reported earlier this month that worker compensation essentially has been flat for the past two years. Current data from the three months ending in June show that trend continuing, meaning wages aren't much higher today than they were during the first quarter of 2008.

Wage growth is weakest at smaller companies (those with fewer than 500 employees), which in part explains the discrepancy between the two companies' research, says Al Lee, director of quantitative analysis at PayScale.

When it comes to granting raises, Lee says, "the largest companies have on average been better than both the midsize and the small, overall."

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alfredschrader

We have a solid long term plan from our leadership. Wait a minute. What plan ?

August 03 2011 at 4:35 AM Report abuse rate up rate down Reply
1 reply to alfredschrader's comment
Carol

What leadership?? America has not had a leader since President Clinton............SAVE AMERICA.............NOBAMA2012.

August 03 2011 at 6:24 AM Report abuse rate up rate down Reply
Sandi

All while median CEO pay has increased 27%. Trickle down my leg

August 03 2011 at 1:34 AM Report abuse rate up rate down Reply
txtornadoi

We MUST vote everyone of the stinkers out, I repeat O U T. Even if the replacement is weak, just do it. We don't need a civil war. WE have the power of the vote. After some new blood comes in...and people see what a joke they are also, then hopefully some leadership, will come to the front. Where are our leaders? Term limitation is key also. We must do this. Talk to everyone. Ask them to vote. I believe the founding fathers saw a different goverment for all of us. We can do it. It will be hard. Please kick the jerks that just voted a 19% raise for them selfs O U T.

August 03 2011 at 12:57 AM Report abuse rate up rate down Reply
harleyatl

Gee, pay is stagnant, and a whole lot of people lost good manufactoring jobs and are now working for a third of what they were once paid. I would guess that means what they pay in taxes has also gone down. We have a big deficit? what a surprise. almost half the country doesn't make enough to pay taxes. (of course, this also means they can't afford to be the good consumers that the large corporations need to keep thier bloated salaries climbing, too, huh?).

August 03 2011 at 12:28 AM Report abuse rate up rate down Reply
cattycoll

WOW..and we didn't know this......what a newsflash.

August 02 2011 at 11:39 PM Report abuse rate up rate down Reply
hbkbdb

no raise in 7 years, can't leave job for fear of no other job. definitely don't see a raise in the future with the car business being so bad

August 02 2011 at 11:31 PM Report abuse rate up rate down Reply
Laura

Really??? we did not notice I agree with Lisa

August 02 2011 at 11:18 PM Report abuse rate up rate down Reply
Lisa

shocking. duh

August 02 2011 at 10:45 PM Report abuse rate up rate down Reply
GamblingMan

Mexicans who work here should be legal or have some type of work sponsored program...how the hell else am i going to get my lawn and garden cleaned up for 30 bucks...my pool cleaned for cheap and bananas 2 pounds for a dollar

August 02 2011 at 10:31 PM Report abuse rate up rate down Reply
GamblingMan

Sucks everything has gotten privatized and outsourced by greedy companies...luckily i'm a union worker

August 02 2011 at 10:27 PM Report abuse +2 rate up rate down Reply
1 reply to GamblingMan's comment
Sandi

Not for long if the GOP has anything to do with it. If you haven't noticed, since the Supreme Court decided to lift restricions on donations made by corporations and unions, the GOP have began an attack intended to weaken the financial backing of the unions. The recent furlough of certain FAA employees and the resulting failure to collect taxes from the airlines seems to be motivated by the GOP trying to force the dems to concede to a House labor provision which would overturn a National Mediation Board rule allowing employees to form a union by simple majority of those voting. So in order to make effective budget cuts, we are losing $250 million every week these FAA employees are furloughed. Great going guys!!

August 03 2011 at 1:53 AM Report abuse rate up rate down Reply

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