The incredible shrinking pay raise: Wages can't keep up with inflation | News
Earlier this year, some 20,000 salaried
workers of Ford Motor Co., mainly in the United States and Canada, got
their first hike in base pay in two years. It wasn't much: a raise of
2.7 percent, on average. But the Dearborn, Mich., automaker threw in
some bonuses in 2011 and again this year.
These days, that looks downright generous.
The annual pay raise -- something workers
could once rely on -- has become a lot more iffy in the aftermath of the
Great Recession. Despite rising corporate profits, average wage hikes
aren't keeping pace with inflation. Some new workers are being paid less
than they would have been five years ago, by some estimates. Hourly
earnings for production and nonsupervisory workers rose so little in the
fiscal year ending in May that their growth rate tied a 47-year record
low, government data show. Given the tight labor market, even those who
have kept their jobs have had limited bargaining power on wages and
"It's a buyer's market for employers," sums
up Linda Barrington, managing director of Cornell University's
Institute for Compensation Studies in New York.
If pay raises continue to shrink, the trend could crimp consumer spending and overall economic growth.
Consider the government's data on salaries:
For the fiscal year that ended in March, wages and salaries grew an
average 1.7 percent, according to the Bureau of Labor Statistics (BLS)
Employee Cost Index. During the same period, consumer prices rose 2.7
percent. And there is little relief in sight.
"We're expecting another economic slowdown in
the US in the second half of this year," says Gad Levanon,
macroeconomic research director at the Conference Board in New York.
"With the unemployment rate declining slowly, if at all, there are still
a lot of job seekers, and employers will still have the upper hand in
wage determination. So I expect very low wage growth even through 2013,"
To be sure, workers in high-demand sectors,
such as high technology or mining, can often command above-average
raises, experts say. Also, current workers appear more likely to be
getting a raise than new hires are. That may explain why separate
private surveys -- from WorldatWork, a global human resources
organization based in Scottsdale, Ariz., and the Hay Group, a
Philadelphia-based global management consultant -- showed employers last
year projecting budget increases for 2012 salaries at nearly twice the
rate of the government's figures: a median 3 percent.
Even these raises are not dazzling by some
historical standards. "In periods of expansion over the past decade,
wage growth has been in the 3 to 5 percent range," reports Mr. Levanon.
He is one of the authors of the conference board's report, "Feeling the
pain: Wage growth in the United States during and after the Great
Recession," published this spring.
Clearly, the wage picture hasn't thrilled
employees, either. In a survey released in April, Glassdoor.com, an
online jobs and career community based in Sausalito, Calif., found that
less than half of respondents -- 43 percent -- were expecting a raise in
the next 12 months, compared with more than 38 percent who weren't.
Less than 50 percent optimism "isn't good
news," says Rusty Rueff, a director at Glassdoor.com, but it was the
first time since 2008 that the optimists had outweighed the pessimists.
When it comes to raises, employees "are still under water, but there
might be a chance to put our head up soon," he adds.
So how can employees get a pay hike in these
hard times? Part of the challenge, some experts say, is to prepare in
advance of your performance review or request for a pay raise.
Understand both the financial condition of your employer and how you've
contributed to the organization. Then, proceed to ask in a confident
manner for the pay hike you want.
To ease the sometimes tricky process,
Salary.com, a career-management website based in Waltham, Mass., that
offers salary information for various industries, provides several tips:
Don't be afraid to ask for a raise, especially during a performance review.
Provide a list of your accomplishments over
the past year when broaching the subject of a raise, and show how this
record of achievement relates to the amount of increased compensation
Be specific: Cite a dollar amount of base pay increase and bonus that you feel you deserve.
If you don't get the base pay hike you want,
ask if you can make up the difference with some other concession, such
as company stock or added vacation time. If the increase involves a
bonus based on performance goals, ask if you can be re-reviewed, say, in