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 1. SALARY INCREASE PROJECTIONS
In every industry, salary increase projections for 2012 are holding steady at 2011 levels, up from increases of 2.6% in 2010.
For the last two years, salary increase budgets have been dramatically lower than in the recent past. From 2005 through 2008, base salary increases hovered between 3.7% and 3.9%. Beginning in late 2008 through mid-2009, the number of companies freezing salaries increased markedly, halving average base salary increases to an actual rate of 2.0%.
World at Work reported that, "For the first time since 1980, the U.S. rate of inflation is higher than the average total salary budget increase. During the 12-month period ending April 2011, inflation, as measured by the U.S. Consumer Price Index (CPI), was 3.2 percent. That compared to a total salary budget increase of 2.8% for the same period, according to the World at Work 2011-2012 Salary Budget Survey." Their explanation is that high unemployment is working to keep salary increase budgets low, and that salary budgets might trend higher if unemployment decreases, putting pressure on employers to raise wages in order to stay competitive.
In July 2011, the Federal Reserve Beige Book, a compendium of economic trends, said that: "Labor market conditions remained soft in most Federal Reserve Districts. Wage pressures remained subdued in most Districts and for most occupations." The table below illustrates that the weakness of the labor markets has dampened upward wage pressure, producing another year of expected moderate wage gains.
The table below shows the amounts that employers spent on employee base salary increases in past years, and the amounts they are budgeting for 2012 (as of Summer 2011). These increases included general salary increases, merit increases, and market adjustments; promotional increases are excluded. Organizations with wage freezes are included in these averages as data points of 0%. The proportion of companies with wage freezes projected for next year has dropped from 20-30% for 2009 to 7-10% of organizations for 2012. Most companies that had wage freezes expect to resume salary increases for 2012.
We are not seeing organizations making up for past pay freezes in this year's salary increase budget.
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Median Salary Increases for All Employees
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2003
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2004
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2005
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2006
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2007
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2008
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2009
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2010 |
2011
Actual |
2012
Proj. |
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GEOGRAPHY
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United
States
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3.6%
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3.5%
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3.7%
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3.7%
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3.8%
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3.9%
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2.0% |
2.6% |
3.0% |
3.0% |
Eastern
US
(incl. DC, MD, PA)
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3.6%
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3.5%
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3.7%
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3.7%
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3.8%
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3.9%
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2.1% |
2.7% |
3.0% |
3.0% |
Southeastern
US
(inc. VA)
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3.5%
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3.5%
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3.7%
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3.7%
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3.8%
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3.9%
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2.1% |
2.8% |
3.0% |
3.0% |
Baltimore, MD
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3.7%
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3.8%
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3.9%
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1.9% |
2.5% |
3.0% |
3.0% |
Washington DC
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4.0%
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4.1%
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4.1%
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2.2% |
2.7% |
3.0% |
3.0% |
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INDUSTRY
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Continuing
Care Retirement
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3.8%
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3.7%
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3.6%
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3.6%
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3.9%
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4.0%
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2.5% |
2.0% |
2.5% |
2.8% |
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Education
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3.2%
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3.0%
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3.4%
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3.5%
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3.5%
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3.6%
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1.9% |
2.0% |
2.5% |
2.8% |
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Finance/Banking
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3.7%
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3.5%
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3.7%
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3.7%
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3.8%
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3.9%
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2.5% |
2.7% |
3.0% |
3.0% |
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Health
Care
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3.9%
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3.7%
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3.8%
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3.8%
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3.8%
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4.0%
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2.8% |
2.5% |
2.5% |
2.7% |
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Information
Technology
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3.6%
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3.7%
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3.7%
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3.7%
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3.9%
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3.9%
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1.9% |
2.8% |
3.0% |
3.0% |
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Insurance
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3.8%
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3.7%
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3.7%
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3.8%
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3.8%
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3.8%
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2.4% |
2.7% |
3.0% |
3.0% |
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Manufacturing
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3.6%
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3.6%
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3.6%
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3.6%
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3.7%
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3.8%
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1.8% |
2.7% |
2.9% |
3.0% |
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Nonprofit
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3.5%
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3.4%
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4.1%
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3.9%
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3.9%
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3.9%
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2.3% |
2.8% |
2.9% |
3.0% |
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Public
Sector
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3.8%
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3.4%
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3.8%
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3.5%
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4.1%
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3.9%
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2.4% |
0.0% |
0.3% |
1.0% |
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Retail
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3.5%
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3.5%
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3.6%
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3.6%
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3.6%
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3.6%
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1.9% |
2.7% |
2.8% |
3.0% |
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Service
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3.7%
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3.6%
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4.0%
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3.8%
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4.1%
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4.1%
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2.3% |
2.8% |
2.8% |
3.0% |
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Transportation
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3.2%
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3.2%
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3.4%
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3.6%
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3.6%
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4.2%
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1.4% |
2.5% |
3.0% |
3.0% |
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Utilities
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3.5%
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3.4%
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3.6%
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3.6%
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3.8%
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4.0%
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3.0% |
3.0% |
3.0% |
3.0% |
Using the Salary Increase Projections
Consider these factors in determining your organization’s salary
increase budget:
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Salary increases
expected at other organizations, especially in your industry
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Your relative
market position, whether it is strong or needs improvement
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How your organization’s
salary (or merit) increase matrix operates
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Your organization’s
strategic business plan for the coming year(s)
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Budgetary
capability
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