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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Photo of the Day: Kanye West at the White House
This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”
Trump called Kanye’s monologue “pretty impressive.”
“That was bonkers,” MSNBC’s Ali Velshi said afterward.
Again, this is 2018.
Chart of the Day: GDP Growth Before and After the Tax Bill
President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.
Are States Ready for the Next Downturn?
The Great Recession hit state budgets hard, but nearly half are now prepared to weather the next modest downturn. Moody’s Analytics says that 23 states have enough reserves to meet budget shortfalls in a moderate economic contraction, up from just 16 last year, Bloomberg reports. Another 10 states are close. The map below shows which states are within 1 percent of their funding needs for their rainy day funds (in green) and which states are falling short.
Chart of the Day: Evolving Price of the F-35
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