Why Big Salary Raises May Be Gone for Good
If you’re hoping for a big raise this year, prepare to be disappointed. Sure, you might be among the lucky people who get a healthy bump in salary, but a recent survey by professional services firm Towers Watson found that companies are planning pay raises of 3 percent on average for workers.
A new survey by human resources and management consultancy Aon Hewitt confirms that forecast: Even as the job market continues to improve, salaried employees can expect their base pay to increase 3 percent, or about a percentage point smaller than the raises employers were handing out 20 years ago.
Related: Full Employment Alone Won’t Solve Problem of Stagnating Wages
From 1996 through 2000, salaries went up by about 4.1 percent a year, according to Aon Hewitt data. From 2011 through 2015, annual raises have averaged about 2.8 percent. And even as we get further away from the recession, that downward shift appears to be permanent, as companies look to keep a lid on their fixed costs.
"The modest increases we've seen over the past 20 years are an indication that employers have changed their compensation strategies for good, and we shouldn't expect to see salary increases revert back to 4 percent or higher levels that were commonplace in the past," said Aon Hewitt’s Ken Abosch.
Related: Obama Moves Toward Executive Action on Overtime Pay
On the bright side, at least for some workers, employers are planning on doling out more money in the form of bonuses, cash awards and other so-called variable pay. Aon Hewitt’s survey found that workers will see their variable pay rise by 12.9 percent this year.
That shift favors higher-level white-collar workers, since companies have been cutting back on bonus and incentive pay for clerical or technical workers. In 2011, only 43 percent of companies gave bonuses or other cash incentives to those hourly workers eligible for overtime pay, down from 61 percent in 2009, according to data Aon Hewitt shared with The Washington Post. On the other hand, 93 percent of companies offer incentive programs to employees with a fixed salary.
As Abosch told the Post: “It’s the haves and the have nots.”
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Takedown of the Day: Ezra Klein on Paul Ryan's Legacy of Debt
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Klein writes that Ryan’s choices while in office — especially the 2017 tax cuts and the $1.3 trillion spending bill he helped pass and the expansion of the earned income tax credit he talked up but never acted on — should be what define his legacy:
“[N]ow, as Ryan prepares to leave Congress, it is clear that his critics were correct and a credulous Washington press corps — including me — that took him at his word was wrong. In the trillions of long-term debt he racked up as speaker, in the anti-poverty proposals he promised but never passed, and in the many lies he told to sell unpopular policies, Ryan proved as much a practitioner of post-truth politics as Donald Trump. …
“Ultimately, Ryan put himself forward as a test of a simple, but important, proposition: Is fiscal responsibility something Republicans believe in or something they simply weaponize against Democrats to win back power so they can pass tax cuts and defense spending? Over the past three years, he provided a clear answer. That is his legacy, and it will haunt his successors.”
Number of the Day: $300 Million
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