Are You Getting What You're Paying For?
Posted using ShareThis
Feb 19, 2010
Sep 21, 2009
The Future of Wage Increases in America
The future isn't looking too good for the typical wage earner in America these days. Not surprisingly, wage growth is quite slow right now, but there is also no foreseeable impetus to increase that growth any time soon, unless you're lucky enough to be in a few selected high demand roles (such as for skilled health-care workers and selected technical professionals).
Not only is the labor market in the worst shape in decades, we likely haven't hit bottom yet. In addition, nearly all economists are predicting a painfully slow jobs recovery over the next few years. Of the millions of jobs lost in this recession, the concern among many labor market pundits is that a good chunk of these jobs may never come back (i.e., many of the manufacturing job losses), and of the ones that do, the recovery will be several years in the making.
Back to wage growth though, here's the current situation relative to the pre-recession period: in the first half of 2007, wages were growing at a healthy 3.7% annualized rate. In the first half of 2009, wages increased at a 1.3% annualized rate, and that may well go down as the labor market continues to deteriorate (labor market conditions generally lag overall economic trends, so even though we've hit bottom overall, according to most economists, the labor market probably hasn't yet).
The current (August) national unemployment is at 9.7%, and is expected to bottom in the 10%+ range sometime early next year. That's the good news. IHS Global Insight is predicting that in 2014, the unemployment rate will average 7.6%, which is still well above the unemployment rate before the recession started in late 2007. The predicted molasses-paced recovery will have a major impact on wage growth in the U.S. for the next few years at the least.
Labor market dynamics are a complex brew of many factors, but at its core is the same "supply and demand" that you learned in Econ 101. With labor current market supply quite high and demand very low (and expected to stay weak for the next few years, due to the slow economic growth being projected), the the case for a strong rebound in wages is not in the cards, barring a much more robust recovery than expected.
It is likely that wage growth could be stuck in the 1.5% to 2.5% range for years, or roughly one-half to two-thirds of historical wage growth.
If this predicted scenario plays out, the implications for the typical American wage earner will be profound. It will also have a large impact on employers, who rely on economic growth to fund their pay-for-performance programs. For some ideas on how to address these issues, see fellow Compensation Cafe' blogger Margaret O'Hanlon's recent post on dealing with "tiny" merit budgets, and my earlier post on using your professional creativity in these lean times.
Not only is the labor market in the worst shape in decades, we likely haven't hit bottom yet. In addition, nearly all economists are predicting a painfully slow jobs recovery over the next few years. Of the millions of jobs lost in this recession, the concern among many labor market pundits is that a good chunk of these jobs may never come back (i.e., many of the manufacturing job losses), and of the ones that do, the recovery will be several years in the making.
Back to wage growth though, here's the current situation relative to the pre-recession period: in the first half of 2007, wages were growing at a healthy 3.7% annualized rate. In the first half of 2009, wages increased at a 1.3% annualized rate, and that may well go down as the labor market continues to deteriorate (labor market conditions generally lag overall economic trends, so even though we've hit bottom overall, according to most economists, the labor market probably hasn't yet).
The current (August) national unemployment is at 9.7%, and is expected to bottom in the 10%+ range sometime early next year. That's the good news. IHS Global Insight is predicting that in 2014, the unemployment rate will average 7.6%, which is still well above the unemployment rate before the recession started in late 2007. The predicted molasses-paced recovery will have a major impact on wage growth in the U.S. for the next few years at the least.
Labor market dynamics are a complex brew of many factors, but at its core is the same "supply and demand" that you learned in Econ 101. With labor current market supply quite high and demand very low (and expected to stay weak for the next few years, due to the slow economic growth being projected), the the case for a strong rebound in wages is not in the cards, barring a much more robust recovery than expected.
It is likely that wage growth could be stuck in the 1.5% to 2.5% range for years, or roughly one-half to two-thirds of historical wage growth.
If this predicted scenario plays out, the implications for the typical American wage earner will be profound. It will also have a large impact on employers, who rely on economic growth to fund their pay-for-performance programs. For some ideas on how to address these issues, see fellow Compensation Cafe' blogger Margaret O'Hanlon's recent post on dealing with "tiny" merit budgets, and my earlier post on using your professional creativity in these lean times.
Doug Sayed, SPHR, CCP is founder of Applied HR Strategies Inc., a Seattle area strategic compensation consultancy, and lead author of the StrategicPay Series "Base Pay Toolkit."
Sep 8, 2009
Aug 11, 2009
Is Technology Bottoming?
Is the technology sector about ready to turnaround, or has it at least hit bottom?
The Department of Labor says that technology related-employment actually rose by 7,400 in July, after several months of declines. Granted, 7,400 jobs isn't a lot for the entire country, but that sure beats the 247,000 jobs that were lost overall, and one of the first really positive bottoming-out signs seen yet, at least in the employment arena, which tends to be a lagging economic indicator.
To date, most of the euphoria about the economy bottoming has been about things getting less bad, as opposed to seeing actual positive numbers (like increased retail sales or increased hiring). So, to see the technology sector actually increasing employment is a huge plus.
Of course, one month does not make a trend, but this at least indicates that a bottom is near or here, at least in technology.
If you work in the technology sector, have you seen any positive changes? Let us hear from you about what you're seeing.
Jul 21, 2009
Seattle VCs Project Increase in Layoffs at Funded Companies
An article in today's TechFlash say that a large chunk (50%) of VC funded businesses in the area are looking to decrease their workforces in the coming months.
With funding WAY down, and most of these businesses not generating enough (or any) cash flow to support their current payroll, staffing has nowhere to go but down.
Just another example of what we've been projecting all along: we have more to go on the downside, before the labor market bottoms.
Jul 13, 2009
Projected Salary Budget Increases Lowest in 36 Years
Salary budget increases are at there lowest in 36 Years, according to preliminary results released last week by WorldatWork.
In addition, according to the press release, at least 40 percent of salary budgets are frozen for officers and executives, says the WorldatWork survey of U.S. organizations.
Below is the press release from WorldatWork that was published earlier today:
Washington, D.C. – July 8, 2009 – Corporate salary budget increases have dropped to historic lows, according to the WorldatWork 36th Annual Salary Budget Survey. At 2.2 percent, the 2009 increase is the smallest in the survey's history and 1.7 percentage points below the 3.9 percent that had been projected in the previous year's report. The WorldatWork survey, the largest of its kind, clearly shows that the economic crisis continues to put pressure on employee salaries, though projections for 2010 suggest improvement.
The 2,600 respondents to the survey are WorldatWork members who are employed in the compensation and benefits departments of various employers, representing a total of 16 million U.S. employees.
"A projected salary budget increase of 2.8 percent for 2010 indicates we may have touched the bottom this year and a turnaround may be on the horizon," said Anne C. Ruddy, CCP, president of WorldatWork. "While it's heartening to think the worst may be behind us, compensation plans will likely be in flux for at least the next 12 months. We plan to re-survey our members this summer to monitor thawing of any kind."
"This recession is having a greater impact on compensation than the previous recession brought on by 9/11, when employers still managed to increase salary budgets by 3.6 percent," observed Alison Avalos, research manager for WorldatWork. In spite of the falling budgets, the survey shows employers are committed to awarding raises to about eight in every 10 of those employed. "This may come as a surprise to many given that one in three survey respondents indicated they are planning zero-percent salary budget increases this year," added Avalos. "Layoffs, hiring freezes, shifting pay increase dollars from executives to staff, and other cost-saving actions may be allowing employers to continue planning for at least some pay increases for remaining employees, especially top performers," Avalos explained.
Human resource practitioners continue to use variable pay, which consists of cash bonuses and other incentives, to reward results. For 2009, employers are budgeting an average of 5 to 11.5 percent for variable pay, depending on employee category.
About the Survey:
WorldatWork collected survey data in April 2009. The full survey report includes results for North American regions, all 50 states, major U.S. metropolitan areas, major industries as well as data by organization size, performance category and employee category.
Additional data cuts are now possible via SBS Online, which gives subscribers the ability to customize data cuts. A free Webinar will be held on August 25 for members and non-members.
In an independent survey by IOMA (April 2009), the WorldatWork Salary Budget Survey was rated the most popular source by 74 percent of large companies surveyed.
About WorldatWork® - The Total Rewards Association
WorldatWork is a global human resources association focused on compensation, benefits, work-life and integrated total rewards to attract, motivate and retain a talented workforce. Founded in 1955, WorldatWork provides a network of more than 30,000 members and professionals in 75 countries with training, certification, research, conferences and community. It has offices in Washington, D.C. and Scottsdale, Arizona.
In addition, according to the press release, at least 40 percent of salary budgets are frozen for officers and executives, says the WorldatWork survey of U.S. organizations.
Below is the press release from WorldatWork that was published earlier today:
Washington, D.C. – July 8, 2009 – Corporate salary budget increases have dropped to historic lows, according to the WorldatWork 36th Annual Salary Budget Survey. At 2.2 percent, the 2009 increase is the smallest in the survey's history and 1.7 percentage points below the 3.9 percent that had been projected in the previous year's report. The WorldatWork survey, the largest of its kind, clearly shows that the economic crisis continues to put pressure on employee salaries, though projections for 2010 suggest improvement.
The 2,600 respondents to the survey are WorldatWork members who are employed in the compensation and benefits departments of various employers, representing a total of 16 million U.S. employees.
"A projected salary budget increase of 2.8 percent for 2010 indicates we may have touched the bottom this year and a turnaround may be on the horizon," said Anne C. Ruddy, CCP, president of WorldatWork. "While it's heartening to think the worst may be behind us, compensation plans will likely be in flux for at least the next 12 months. We plan to re-survey our members this summer to monitor thawing of any kind."
"This recession is having a greater impact on compensation than the previous recession brought on by 9/11, when employers still managed to increase salary budgets by 3.6 percent," observed Alison Avalos, research manager for WorldatWork. In spite of the falling budgets, the survey shows employers are committed to awarding raises to about eight in every 10 of those employed. "This may come as a surprise to many given that one in three survey respondents indicated they are planning zero-percent salary budget increases this year," added Avalos. "Layoffs, hiring freezes, shifting pay increase dollars from executives to staff, and other cost-saving actions may be allowing employers to continue planning for at least some pay increases for remaining employees, especially top performers," Avalos explained.
Human resource practitioners continue to use variable pay, which consists of cash bonuses and other incentives, to reward results. For 2009, employers are budgeting an average of 5 to 11.5 percent for variable pay, depending on employee category.
About the Survey:
WorldatWork collected survey data in April 2009. The full survey report includes results for North American regions, all 50 states, major U.S. metropolitan areas, major industries as well as data by organization size, performance category and employee category.
Additional data cuts are now possible via SBS Online, which gives subscribers the ability to customize data cuts. A free Webinar will be held on August 25 for members and non-members.
In an independent survey by IOMA (April 2009), the WorldatWork Salary Budget Survey was rated the most popular source by 74 percent of large companies surveyed.
About WorldatWork® - The Total Rewards Association
WorldatWork is a global human resources association focused on compensation, benefits, work-life and integrated total rewards to attract, motivate and retain a talented workforce. Founded in 1955, WorldatWork provides a network of more than 30,000 members and professionals in 75 countries with training, certification, research, conferences and community. It has offices in Washington, D.C. and Scottsdale, Arizona.
Subscribe to:
Posts (Atom)
