Christian Science Monitor: Pay Raises Can’t Keep Up With Inflation

Tuesday, 10 Jul 2012 02:33 PM

By Nancy Stanley

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Wage increases are not keeping up with inflation, The Christian Science Monitor reports, and if this trend continues, consumer spending might stall and economic growth could come to a halt.

For the fiscal year ended in March, wages and salaries increased an average of 1.7 percent, according to Bureau of Labor Statistics data cited by The Monitor.

However, during the same time, consumer prices increased 2.7 percent.

Pay raises are getting smaller and in some cases are nonexistent. The growth in hourly earnings for production and nonsupervisory employees tied a 47-year record low for the year ending in May.

"It's a buyer's market for employers," said Linda Barrington, managing director of Cornell University's Institute for Compensation Studies, The Monitor reported.

And there appears to be little relief in sight.

"We're expecting another economic slowdown in the U.S. in the second half of this year," said Gad Levanon, macroeconomic research director at The Conference Board. "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."

Interestingly, employees in high-demand sectors, such as mining or technology, can sometimes get above-average pay raises, and current workers are more likely to get a raise than are new hires.

Data from two separate private surveys predicted that employers were projecting budget increases for 2012 salaries of 3 percent, The Monitor stated.

However, even these projections do not hold ground according to historical standards.

"In periods of expansion over the past decade, wage growth has been in the 3 to 5 percent range," Levanon said.

According to a new survey by Glassdoor.com, a website that specializes in anonymous reviews and data about companies and jobs, employee optimism about pay raises declined in the second quarter to 40 percent from 43 percent in the first quarter.

In addition, 37 percent of those polled do not expect a pay raise, the lowest proportion since the survey began in 2008.

Rusty Rueff, a director at Glassdoor.com said less than 50 percent optimism “isn’t good news,” noting that this year was the first time since the survey began that the optimists outweighed the pessimists.

However, employees “are still under water” with regard to raises. “But there might be a chance to put our head up soon,” he said.


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