An Update on Salary Increase Budgets in the Wake of the Economic Crisis

I have twice updated my October 24 post (A Look at Salary Increases in the Wake of the Economic Crisis) as new and additional information has become available.

The latest substantive data on what's happening to salary increase budgets as our economy staggers comes from BLR (Business & Legal Reports). Based on its survey of 518 employers, BLR reports that employers are currently budgeting an average 2009 salary increase of 2.8%, down 25% from the 3.7% reported by BLR following their June survey.  This is consistent with other drops in budgeted 2009 salary increases recently reported by Hewitt (down to 3.1% from 4.1%) and Watson Wyatt (down to 2.5% from 3.7%).

I'll continue to share updates here on 2009 salary plans as they are released.

Comments

[Totally Consumed]

The State of Oregon has a law that ties the minimum wage to the Aug-to-Aug CPI of the preceding year. Jan 2009, the OR min wage will increase by 5.37%.

With private companies increasing wages between 2.5% and 3.1%, and Oregon increasing the min wage 5.37%, we're in for some serious wage compression; at least in the short run.

[Ann Bares]

TC-

Interesting scenario and you're right - it will create some interesting dynamics, and ultimately compression, on the low end of wages. Oregon employers, depending on the demographics and mix of their employee population, might have to play that one out carefully.

Thanks for sharing!

[E James (Jim) Brennan]

I happen to be in WA, which has the highest minwage in the country, currently $8.07 and ratcheting up every January 1. Wage compression is a constant factor at the bottom of the scale. Know of many cases where 20-year veteran store managers earn merely 5 cents an hour more than the newest least-skilled teenage student part-time worker. So much payroll at places hiring relatively unskilled folks goes to cover the annual minwage escalation than there is virtually nothing left to be allocated for superiors to stretch-out their progressions for rational lead positions. People have no idea what the growing trend towards State overrides to the Federal minwage has done: it has legislated locally required COL-justified pay at the bottom levels where maturity curve trumps promotability. Here's the seminal research @ http://www.erieri.com/PDF/COLvsMerit.pdf and it's gotten worse since then, as more states pass overrides. Compare the W@W map of state minwages (noting those adding them in Jan 2009) with the post-election Obama electoral vote distribution map... substantially an overlay.

[Ann Bares]

Jim:

Intriguing points and data - thanks for sharing it here. Not many are paying attention to the macro-level impact of some of these trends and decisions. Good to raise awareness of this, thanks for doing so here.