High unemployment and uneven demand for labor are keeping salary budget increases low
Here’s a sobering thought for today’s U.S. workforce: For the first time since 1980, the U.S. rate of inflation is higher than the average total salary budget increase. And until employment levels fall, there’s little incentive for companies to bolster their salary budgets.
Pay increases haven’t kept up with the rate of inflation across nearly all industries, says WorldatWork, a nonprofit organization focused on human resources issues. Mining, oil and gas industries are the exception.
During the 12-month period ending April 2011, inflation (as measured by the Consumer Price Index) was 3.2%. During the same time period, total salary budgets increased just 2.8%, according to WorldatWork’s 2011-2010 Salary Budget Survey.
High unemployment and uneven demand for labor are the main culprits keeping salary budget increases low. Budgets may not climb significantly until unemployment decreases and demand for talent increases.
“Successful organizations will not pay more than necessary for any expenditure, and with low risk of losing employees to other organizations, higher increases are not justified at this time,” said Don Lindner, senior compensation practice leader for WorldatWork, in a statement.
For the same reasons, few companies are making up for pay freezes they implemented in the past.
“Time will tell if salary budget increases will return to pre-recessionary levels, but hikes may only occur if the weight shifts between the supply and demand for labor,” said Alison Avalos, research manager for WorldatWork. “Mining, quarrying, oil and gas companies are currently experiencing a shortage of skilled labor so their 2012 planned salary budgets are above average, at 4.1%.”
U.S. employees in other industries can expect average pay increases of 2.9% in 2012, the firm estimates.
