Are You Getting What You're Paying For?
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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.
Jun 16, 2009
WA State Unemployment Rate Hits 9.4%
After stabilizing for one month in April (after a long string of unemployment rate increases), the State's unemployment rate has resumed its upward march, standing now at 9.4% for May 2009 (up from April's adjusted 9.0%).
In the past year, the total number of unemployed in the state has nearly doubled rising from 177,000 to 336,00. Over the past year 116,000 jobs have been lost in the state, but even more surprising is that over 40% of those losses have taken place since the beginning of this year.
Even some of the formerly strong areas such as high tech workers are now on the decline. "Information" workers are down 2.9% in the past year.
The only areas showing net increases over the past year are healthcare, social services and government (virtually nothing can't halt the growth of government!). The view the compete report from the state, click here.
In the past year, the total number of unemployed in the state has nearly doubled rising from 177,000 to 336,00. Over the past year 116,000 jobs have been lost in the state, but even more surprising is that over 40% of those losses have taken place since the beginning of this year.
Even some of the formerly strong areas such as high tech workers are now on the decline. "Information" workers are down 2.9% in the past year.
The only areas showing net increases over the past year are healthcare, social services and government (virtually nothing can't halt the growth of government!). The view the compete report from the state, click here.
Jun 14, 2009
Visit Doug at the Conference!
When I was at the WorldatWork conference in early June in Seattle, I ran into an old friend and colleague, Matt Johnson of NextComp (developer of a great market pricing tool you should checkout at www.Nextcomp.net).
Matt was nice enough to shoot a brief video of me introducing the new StrategicPay Series (www.strategicpayseries.com). You can find that blog post and accompanying video here.
Enjoy!
Matt was nice enough to shoot a brief video of me introducing the new StrategicPay Series (www.strategicpayseries.com). You can find that blog post and accompanying video here.
Enjoy!
Healthcare Cost Containment?
If you see any real healthcare cost containment going on, please let me (and the rest of the country) know.
Each year some major consulting firms and others conduct their annual healthcare cost studies, and while the trends seemed to be moving toward slightly lower annual increases (down to the upper single digits, from the low double digit percentage annual increases), the last two studies I've seen are predicting roughly 10% annual increases in healthcare cost for 2009 and 2010, in the middle of major a major recession with virtually no (non-healthcare) inflation!
For instance the Buck Consultants 20th National Health Care Trend Survey is predicting between 10% and 11% annual increases (depending on plan type) for 2009 and 2010. In other words, while wages are are flat to down in real (post-inflation) terms and companies suffering from falling sales and profits, somehow, healthcare can increase 10% in cost.
I've been reading about how many consumers are delaying going to the doctor, and not electing to have elective procedures done, but costs still go up 10%? Somewhere I recall hearing about this concept called "the law of supply and demand," but apparently I was mistaken about that!
Healthcare costs for employers have more than doubled since the turn of the century and employee's out-of-pocket cost have tripled. Healthcare is slowly bankrupting our country.
I'm not a fan of government intervention in the free market, or of government-provided healthcare, but something has to be done. In 1980, healthcare was about 9% of GDP, and in 2009 it will be approximately 18%. We're heading toward 20% of GDP being spent on healthcare in this country within a few years. Yes, you read correctly, one out of every five dollars spent in this country, will be spent on healthcare alone.
Each year some major consulting firms and others conduct their annual healthcare cost studies, and while the trends seemed to be moving toward slightly lower annual increases (down to the upper single digits, from the low double digit percentage annual increases), the last two studies I've seen are predicting roughly 10% annual increases in healthcare cost for 2009 and 2010, in the middle of major a major recession with virtually no (non-healthcare) inflation!
For instance the Buck Consultants 20th National Health Care Trend Survey is predicting between 10% and 11% annual increases (depending on plan type) for 2009 and 2010. In other words, while wages are are flat to down in real (post-inflation) terms and companies suffering from falling sales and profits, somehow, healthcare can increase 10% in cost.
I've been reading about how many consumers are delaying going to the doctor, and not electing to have elective procedures done, but costs still go up 10%? Somewhere I recall hearing about this concept called "the law of supply and demand," but apparently I was mistaken about that!
Healthcare costs for employers have more than doubled since the turn of the century and employee's out-of-pocket cost have tripled. Healthcare is slowly bankrupting our country.
I'm not a fan of government intervention in the free market, or of government-provided healthcare, but something has to be done. In 1980, healthcare was about 9% of GDP, and in 2009 it will be approximately 18%. We're heading toward 20% of GDP being spent on healthcare in this country within a few years. Yes, you read correctly, one out of every five dollars spent in this country, will be spent on healthcare alone.
May 28, 2009
Announcing the StrategicPay Series!
Today, Applied HR Strategies is announcing the publication of the first of several planned "hands on" guidebooks to help business, HR and even compensation professionals to be able to "do it yourself" ("DIY") on compensation development projects that are normally hired out to compensation consultants, at many times the cost of the Series modules (we call then toolkits).
The StrategicPay™ Series was created for HR, compensation and business professionals that want to have technically sound and professional compensation programs, but who can't afford (or don't want to afford) the high cost of hiring outside compensation consultants. It's also designed to help HR and compensation professionals learn and grow professionally in strategic areas of compensation planning and program development.
Also, effective immediately, the StrategicPay Series website will also be the home of our main blog. We will continue to periodically post compensation and HR stories directly related to the Pacific Northwest here, but for our main blog, visit us here.
The StrategicPay™ Series was created for HR, compensation and business professionals that want to have technically sound and professional compensation programs, but who can't afford (or don't want to afford) the high cost of hiring outside compensation consultants. It's also designed to help HR and compensation professionals learn and grow professionally in strategic areas of compensation planning and program development.
Also, effective immediately, the StrategicPay Series website will also be the home of our main blog. We will continue to periodically post compensation and HR stories directly related to the Pacific Northwest here, but for our main blog, visit us here.
May 16, 2009
Are Wages Falling?
Are wages falling in this recession?
The answer to that question depends on who's wages we're talking about. Different angles of this question will yield different answers.
With nearly 15 million Americans unemployed (and that doesn't count "disaffected" job seekers who've dropped out of the labor force or taken part-time work in the interim), competition for jobs hasn't been this high in decades.
And just like many of us learned in Economics 101, when demand falls and supply increases, prices fall (in this case, prices = wage rates). Generally this is most pronounced at the hiring level, as most companies are generally reluctant to cut wages for their workforces overall.
Despite the downward pressure, if you consult salary surveys coming out the first half of 2009, most will probably show a modest (albeit small) increase in overall wage rates from last year. Why? The reason is that salary surveys are generally measures of pay for employed workers, not a measurement of how hiring rates are changing, although that data eventually works its way into databases that survey vendors report data from.
Chances are that for most jobs, hiring rates are indeed falling, while overall wages rates are fairly stable (wages rates are stable to slightly increasing for those that have remained employed). For instance, an article on the SHRM (Society for HR Management) website reports that hiring rates have dropped 7.0% in the service sector and 10.0% in manufacturing year over year (March '08 to March '09). While these are large drops by any standard, that doesn't mean that wages are falling precipitously everywhere. We know that both of these areas are very weak right now, so these drops are not too shocking.
But what about stronger areas like health care or government (almost nothing can stop the growth of government!). We doubt wages have fallen for nurses and many other still in-demand health care workers, and for "hot skill" roles in technology, such as experts in web search technology or social networking (Twitter anyone?).
A good labor market analogy is that labor markets are much like the regional weather patterns, full of micro-climates within larger overall weather trends and systems. We know, for instance, that certain areas within specific wine growing regions are slightly cooler/warmer or wetter/dryer than other nearby areas, sometimes just a hundred yards away, and it's the same with labor markets. We know the macro trend is down in this labor market, but that doesn't mean it's a universal trend that applies to all jobs and all regional labor markets. Do your research before making sweeping generalizations based on the larger overall pay trends.
Doug Sayed, SPHR, CCP, is principal at Applied HR Strategies, Inc., a compensation consultancy based in the Seattle area. Doug is a Certified Compensation Professional (CCP) with over 20 years of HR and compensation experience, and a Master's degree in HR management from the Ohio State University. He is the lead developer of the StrategicPay™ Series, a series of "do it yourself" compensation resource toolkits, the first edition of which has just been released for publication.
Apr 22, 2009
What's Happening in CEO/Executive Comp
Attended the Wall Street Journal / Hay Group 2008 CEO Compensation Study webinar earlier this week and learned a lot about what's happening in CEO pay over the past year. The trends and changes are many.
The study looked at proxy filings for 200 large (>$5B in revenue) public companies that filed their proxy reports in the 10/08 to 3/09 period, so the data is very current. While I realize that most of our blog followers are not in companies of this size, many (if not most) major trends in executive compensation tend to come out of larger firms, who have the internal and external resources to research, develop and implement new and new, different and "game-changing" executive compensation programs.
While the issues and trends discussed in the study are too numerous to cover here, below are some of the major trends and issues discussed with regard to CEO compensation:
- CEO total compensation dropped in 2008 for the first time since 2001, when the U.S. was in a recession and suffering from post-Internet "bubble."
- The drop in Total Cash Compensation (TCC) was -8.5%, due to a drop in cash incentives of over 10% in 2008 vs. 2007 (base pay was up 4.5% in 2008; it won't be up that much this year though).
- Total Direct Comp (TDC), which is total cash comp or TCC, plus realized gains from stock or other sources was down 3.4%.
- The shift away from stock options towards performance shares (stock that grants and/or vests based on the achievement of predetermined performance targets) continues. The use of restricted stock was down slightly, largely at the expense of performance shares.
Some major executive comp practice trends noted in the survey were:
- More and more companies are reducing or changing some of the more egregious (at least from the outside critics' perspectives) executive compensation practices (see details below).
- Executive perquisites or "perks" were roughly flat in 2008 with 2007, after several years of gains. Recently imposed reporting requirements, as well as increased scrutiny of these perks may have slowed down their growth.
- Gross-ups (covering the taxes owed by an executive on compensation, often on special perks) are declining in prevalence, due to their widely negative perception. There's an article on this in the 4/21 Wall Street Journal (paid subscription required).
- Clawbacks (the ability to recover an ill-gotten gain) are increasing in usage (and are required under the Federal TARP program).
- The "Say on Pay" (non-binding shareholder votes on executive compensation plans) movement is gaining steam. While not required now, it was the feeling of the expert panel that eventually, this may be required by Congress (it already is for TARP recipients).
Other trends noted in the presentation:
- Increased emphasis on performance-oriented equity, such as performance shares. Performance shares have been gaining ground for the past few years, and the panel expect that trend to continue.
- Compensation committees should start to look at concept of "risk" in their executive comp plans. In other words, do the plans they help set encourage excessive executive risk taking? Comp committees should help to "manage" risk in designing executive rewards.
- Companies will be very conservative with base pay in 2009 (this is already happening, with many companies freezing base pay for executives).
- Reduced perks are likely, gross ups on the decline, and pressure to reduce or eliminate high-value golden parachutes.
Well, that's about it for now. The full report should be out in May, and would suggest that those of you who are interested in major trends in executive compensation should look for it via the WSJ or the the Hay Group.
Apr 14, 2009
Unemployment Soars in the Pacific Northwest
Having lived in the northwest since the mid-80s, I missed the "will the last person...turn out the lights" era. Back then, in the early 80s, the Puget Sound regional economy was dominated by Boeing, and today we're far more diversified than that. Our economic diversity has been no savior in this recession though (sort of like the stock market, where diversification hasn't helped there either).
But at least since I've been here in the northwest, this is by far the worst labor market I've seen (although my hometown - in the Detroit suburbs - is far worse off than we are, and won't be seeing any recovery for many years). Today's labor market makes the 2001-2003 jobs downturn look downright wimpy by comparison (and I thought the '01-'03 period was was pretty ugly at the time).
Oregon reported today that unemployment rose to 12.1% in March. That's tied for the highest rate the state has reported since it began tracking unemployment in 1947 (equaling the high point in the 1982 recession). That record will be broken soon.
While not as bad off as Oregon, Washington state is now up to 9.2% unemployment for March, jumping up nearly a full point from February's 8.3% revised rate. Meanwhile in Seattle, a jobs "safe haven" in the past few years, unemployment rose to 8.1%, from February's 7.6% rate.
Just one year ago, Washington's unemployment rate was 4.8%, and the Seattle metro area was well below 4%, so unemployment has doubled in the past 12 months.
If you've seen my earlier posts, I've been predicting for some time the worst labor market in many years, and now we can safely change "years" to "decades." We've also noted that the labor market is a lagging indicator, and so it's likely that unemployment will continue to worsen for several more months, even if the economy starts bottoming out and/or recovering soon (and no one knows when "soon" will be).
But at least since I've been here in the northwest, this is by far the worst labor market I've seen (although my hometown - in the Detroit suburbs - is far worse off than we are, and won't be seeing any recovery for many years). Today's labor market makes the 2001-2003 jobs downturn look downright wimpy by comparison (and I thought the '01-'03 period was was pretty ugly at the time).
Oregon reported today that unemployment rose to 12.1% in March. That's tied for the highest rate the state has reported since it began tracking unemployment in 1947 (equaling the high point in the 1982 recession). That record will be broken soon.
While not as bad off as Oregon, Washington state is now up to 9.2% unemployment for March, jumping up nearly a full point from February's 8.3% revised rate. Meanwhile in Seattle, a jobs "safe haven" in the past few years, unemployment rose to 8.1%, from February's 7.6% rate.
Just one year ago, Washington's unemployment rate was 4.8%, and the Seattle metro area was well below 4%, so unemployment has doubled in the past 12 months.
If you've seen my earlier posts, I've been predicting for some time the worst labor market in many years, and now we can safely change "years" to "decades." We've also noted that the labor market is a lagging indicator, and so it's likely that unemployment will continue to worsen for several more months, even if the economy starts bottoming out and/or recovering soon (and no one knows when "soon" will be).
Apr 9, 2009
Join me at the Compensation Cafe'
I've started writing for the new Compensation Cafe' blog that was just launched earlier this week.
We have an excellent lineup of writers with strong and varied backgrounds in compensation.
Stop by for a taste at the Cafe', which promises “Serving up straight talk, original thinking and caffeinated discussion on everything compensation.”
See you there!
We have an excellent lineup of writers with strong and varied backgrounds in compensation.
Stop by for a taste at the Cafe', which promises “Serving up straight talk, original thinking and caffeinated discussion on everything compensation.”
See you there!
Mar 4, 2009
Merit Budgets Plunge to Lowest Level Ever
A recent study done by Watson Wyatt show merit budgets plunging to their lowest level ever (at least since records of these kinds of things have been kept), and we at AHRS think they are going even lower. Why? Just follow the news...
It's hard to be sanguine about the state of the labor market in the face of recent news:
- GDP fell a -6.2% in the fourth quarter of 2008 (worst fall since 1982).
- The Federal Reserve is predicting a -7% drop in 1st quarter GDP (from the Fed's "Beige Book" report released 3/4/09), followed by a projected 3% drop in the second quarter.
- The ADP National Employment Report(R) reported today that that private sector employment decreased by 697,000 in February.
- As companies sales, profits and balance sheet continue to deteriorate, there is nowhere for compensation budgets to go but down, and then down even further.
Feb 17, 2009
Employment and Income Drops in Silicon Valley
For the fist time since 2003, per capita income in the world's largest technology playground, Silicon Valley, has dropped. Year-over-year employment also dropped for the first time in years as well.
According to various reports, until the past few months, the tech sector was feeling pretty smug about possibly taking a pass on this recession, but now it's arrived in full force. No one is immune.
According to an article in today's Wall Street Journal, quoting Jason Hancock, CEO of Joint Venture Silicon Valley, "There was a feeling that Silicon Valley had special assets to help weather the crisis, but we now know we're in for the same pain." "We haven't hit bottom yet and it will be a while."
Employment was down 1.3% over the past 12 months, while per-capital income is own 0.8% over the same period. Both numbers had been rising steadily since the area started recovering from 2000 tech bust, which hit the Valley area economy quite hard.
I remember that prior to the tech bust in 2000, many in the industry felt that technology was recession resistant, but it turned out to be highly cyclical. Proctor and Gamble is recession resistant, technology is not. People need soap, but they can run their XP machines for another year without loss of life, or even of personal hygiene.
We expect employment, personal income, job prospects, wage growth and salary budget to continue to decline until the housing and banking crunch have hit bottom and started to recover. Honestly, nobody knows when that will be at this point, not even Federal Reserve Chair Ben Bernanke or Treasury Secretary Tim Geithner.
According to various reports, until the past few months, the tech sector was feeling pretty smug about possibly taking a pass on this recession, but now it's arrived in full force. No one is immune.
According to an article in today's Wall Street Journal, quoting Jason Hancock, CEO of Joint Venture Silicon Valley, "There was a feeling that Silicon Valley had special assets to help weather the crisis, but we now know we're in for the same pain." "We haven't hit bottom yet and it will be a while."
Employment was down 1.3% over the past 12 months, while per-capital income is own 0.8% over the same period. Both numbers had been rising steadily since the area started recovering from 2000 tech bust, which hit the Valley area economy quite hard.
I remember that prior to the tech bust in 2000, many in the industry felt that technology was recession resistant, but it turned out to be highly cyclical. Proctor and Gamble is recession resistant, technology is not. People need soap, but they can run their XP machines for another year without loss of life, or even of personal hygiene.
We expect employment, personal income, job prospects, wage growth and salary budget to continue to decline until the housing and banking crunch have hit bottom and started to recover. Honestly, nobody knows when that will be at this point, not even Federal Reserve Chair Ben Bernanke or Treasury Secretary Tim Geithner.
Feb 7, 2009
U.S. Unemployment Rises 4.9% in One Year
The U.S. unemployment rate spiked up 4.9% over the past 12 months based on January's 7.6% rate. This is the largest one-year increase since 1975 (the year after I graduated from high school - yikes!).
While the 7.6% rate seems awfully high, and it certainly is by any recent standard, the sheer volume of job losses is more staggering. 3.6 million jobs have been lost since the decline started in late 2007, but the past three months (11/08 - 1/09) have averaged approximately 500,000 jobs lost per month, an unprecedented pace.
More scary perhaps is the the BLS (Bureau of Labor Statistics) “U-6″ rate, that includes disaffected workers who have dropped out of the labor force in frustration and those who are "marginally" employed (such as those working PT, but wanting FT work, etc). This wider measure is now at an astounding 13.9% rate (up from 13.5% in December), or about one in seven workers in the U.S.
We at AHRS believe that joblessness will continue to rise at a fast clip, and unemployment will approach (or maybe even exceed) 10% before we hit bottom.
Merit and other salary increase budgets will continue to decrease, even though they are near historic lows already.
Our hope (and it's just that, a hope) is that the labor market and business demand will bottom in the second half of 2009. This hope assumes that the alleged stimulus plan (that full of all sorts of non-stimulus pork) has its intended affect, that the banking system can be stabilized (at taxpayer expense, of course), and that business and consumer sediment bottoms and starts to improve.
Even if all of these good things occur, it will likely be the second half of 2010 (at the earliest) before the labor market would start to rebound. The labor market tends to be a lagging indicator, as employers are generally reluctant to open their wallets, until they feel confident that a true turn-around is in place.
While the 7.6% rate seems awfully high, and it certainly is by any recent standard, the sheer volume of job losses is more staggering. 3.6 million jobs have been lost since the decline started in late 2007, but the past three months (11/08 - 1/09) have averaged approximately 500,000 jobs lost per month, an unprecedented pace.
More scary perhaps is the the BLS (Bureau of Labor Statistics) “U-6″ rate, that includes disaffected workers who have dropped out of the labor force in frustration and those who are "marginally" employed (such as those working PT, but wanting FT work, etc). This wider measure is now at an astounding 13.9% rate (up from 13.5% in December), or about one in seven workers in the U.S.
We at AHRS believe that joblessness will continue to rise at a fast clip, and unemployment will approach (or maybe even exceed) 10% before we hit bottom.
Merit and other salary increase budgets will continue to decrease, even though they are near historic lows already.
Our hope (and it's just that, a hope) is that the labor market and business demand will bottom in the second half of 2009. This hope assumes that the alleged stimulus plan (that full of all sorts of non-stimulus pork) has its intended affect, that the banking system can be stabilized (at taxpayer expense, of course), and that business and consumer sediment bottoms and starts to improve.
Even if all of these good things occur, it will likely be the second half of 2010 (at the earliest) before the labor market would start to rebound. The labor market tends to be a lagging indicator, as employers are generally reluctant to open their wallets, until they feel confident that a true turn-around is in place.
Feb 2, 2009
Merit Budgets Continue to Plummet
Just released results from the WorldatWork Salary Budget Survey Special Update reveal that merit budgets continue to plummet, and that Seattle-area budgets are down more than the nation as a whole.
Overall, results from the Special Update (data was collected in early December) show the average merit budget dropping to 3.1% from the 3.9% projected for 2009 when the survey was originally done in the spring of 2008.
Back here in the Pacific Northwest where we hail from, budgets have dropped even lower, to 2.8% in both Seattle and Portland, tied for the lowest large metro area merit budgets in the country.
Approximately 1 in 6 employers reported a 0% salary increase budget for 2009, a dramatic increase over recent years.
Merit budgets are back to historic low levels, last seen early in the decade, after the stock market collapse starting in 2000, and 2001 recession.
We at AHRS expect salary increase budgets to continue to drop from current levels in early 2009, although the pace of the decrease should slow, barring new unforeseen major economic events yet to unfold.
Overall, results from the Special Update (data was collected in early December) show the average merit budget dropping to 3.1% from the 3.9% projected for 2009 when the survey was originally done in the spring of 2008.
Back here in the Pacific Northwest where we hail from, budgets have dropped even lower, to 2.8% in both Seattle and Portland, tied for the lowest large metro area merit budgets in the country.
Approximately 1 in 6 employers reported a 0% salary increase budget for 2009, a dramatic increase over recent years.
Merit budgets are back to historic low levels, last seen early in the decade, after the stock market collapse starting in 2000, and 2001 recession.
We at AHRS expect salary increase budgets to continue to drop from current levels in early 2009, although the pace of the decrease should slow, barring new unforeseen major economic events yet to unfold.
Jan 23, 2009
Unemployment Spikes Across the Northwest
Unemployment rates spiked in the final month of 2008, as jobless rates in Washington, Oregon and Idaho all went up up dramatically.
Just this week, Washington State reported a 0.8% increase in its December unemployment to 7.1%, just a tad below the 7.2% national rate. While still slightly better than many areas in the country, the worst is yet to come for the region. Oregon’s unemployment rate in December also shot up to 9.0%, a dramatic rise from year-earlier levels.
What a difference just a few months make! Last summer, the Seattle area maintained a 3.5% seasonally adjusted unemployment rate, and actually below jobless rates of late 2007. Today that rate is 6.2% (12/08 data). Not bad though, considering the unemployment rates for Washington (7.1%), Oregon (9.0%) and the U.S. (7.2%) are much worse off.
Oregon has been particularly hard hit. In the past year, unemployment has soared from 5.7% in November 2007 to 9.0% a bit over a year later. In the past year, only government, heath and education employment are up in Oregon. The next strongest is high tech, at -1.9% in job “growth.” Construction and manufacturing have taken a hard hit, down 12.1% and 14.5% respectively.
And the worst is yet to come. Keep in mind the December figures don't even include a bevy of recently announced layoffs (Boeing, Microsoft, etc.), the 1/1/09 effective date of many of the WAMU layoffs, and the trickle-down impact of these and other jobs cuts in the past couple of months.
We at AHRS expect the employment picture to worsen for at a minimum several more months, and then to stay in recessionary territory for many months after the overall economy bottoms and starts to recover.
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