Get ready for (slightly) fatter paychecks
The most obvious sign of the economic recovery may be in
your paycheck.
your paycheck.
As companies return to profitability, many plan to award
employees with better raises in 2011 after years of stagnant wages, according
to two recent reports.
employees with better raises in 2011 after years of stagnant wages, according
to two recent reports.
More than 98% of companies said they plan to increase base
pay in 2011, according to Mercer's recent compensation survey.
pay in 2011, according to Mercer's recent compensation survey.
And separate survey by human resources firm Towers Watson
found that fewer companies are freezing salaries this year, with only 5%
planning to do so in 2011, down from 12% last year and 32% in 2009.
found that fewer companies are freezing salaries this year, with only 5%
planning to do so in 2011, down from 12% last year and 32% in 2009.
But employees may have to squint to see a difference in
their take-home pay.
their take-home pay.
The employers surveyed by Mercer said that the average
increase is expected to be 2.8% in 2011, up from 2.7% last year.
increase is expected to be 2.8% in 2011, up from 2.7% last year.
A 2.8% raise comes out to about $38 more per paycheck after
taxes for a full-time worker, assuming the employee makes the median annual
income of $50,500 and is paid biweekly.
taxes for a full-time worker, assuming the employee makes the median annual
income of $50,500 and is paid biweekly.
"Wage growth is going to be very limited this year, but
at least it's heading in the right direction," said Joseph Coombs, a
workplace trends and forecasting specialist for the Society of Human Resources.
at least it's heading in the right direction," said Joseph Coombs, a
workplace trends and forecasting specialist for the Society of Human Resources.
Despite the improvement, workers are for the most part still
trying to work their way back to break even. During the recession, high
unemployment and slow economic growth took a toll on wages. After declining in
2009 and staying mostly flat in 2010, national average wage levels are now no
higher than they were at the start of 2008, three years ago, according to a
report released Tuesday by PayScale.com.
trying to work their way back to break even. During the recession, high
unemployment and slow economic growth took a toll on wages. After declining in
2009 and staying mostly flat in 2010, national average wage levels are now no
higher than they were at the start of 2008, three years ago, according to a
report released Tuesday by PayScale.com.
Meanwhile, the cost of goods has increased, reducing
consumer buying power, the salary-tracking firm said.
consumer buying power, the salary-tracking firm said.
But as business conditions improve and the job market starts
to show signs of life, companies are gaining the flexibility to pay their
workers more - and they have more incentive to try and retain top
talent, Coombs explained.
to show signs of life, companies are gaining the flexibility to pay their
workers more - and they have more incentive to try and retain top
talent, Coombs explained.
"For employees who suffered with their employers
through the worst of the recession, things have largely stabilized now and we
can look forward to some incremental improvement," added Laury Sejen, a
rewards practice leader at Towers Watson.
through the worst of the recession, things have largely stabilized now and we
can look forward to some incremental improvement," added Laury Sejen, a
rewards practice leader at Towers Watson.
Even though most indicators point to an improvement in the
year ahead, Al Lee, PayScale's director of quantitative analysis, notes that
employers are still far from the days of awarding hefty annual raises.
year ahead, Al Lee, PayScale's director of quantitative analysis, notes that
employers are still far from the days of awarding hefty annual raises.
"At the end of next year the odds are you are not going
to be seeing a fat raise," he said. "If you get a percent or two, be
happy."
to be seeing a fat raise," he said. "If you get a percent or two, be
happy."
summary:
Employment wages are driven by supply and demand, not company profitability
or government mandate. Mickey is right - profitability has been very high over
the last couple of years for most companies. As long as there is a cheap supply
of labor overseas the big businesses will outsource whatever work they can. When
demand for products and services increases businesses will be forced to hire
some in the states and wages will rise as the best employees jump ship for
better offers and some of the unemployed get jobs.
or government mandate. Mickey is right - profitability has been very high over
the last couple of years for most companies. As long as there is a cheap supply
of labor overseas the big businesses will outsource whatever work they can. When
demand for products and services increases businesses will be forced to hire
some in the states and wages will rise as the best employees jump ship for
better offers and some of the unemployed get jobs.
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