Saturday, February 17, 2018

5 Reasons You Didn't Get a Bigger Raise This Year

Wage growth has been stable at 3% across the country and in Europe and Japan since we got out of the recession in 2008. Three percent doesn't allow for a lot of differentiation in salary increases across an organization, so it's likely your raises have been pretty unimpressive. It's been ten years since the economy tanked, so why aren't employers putting more money into salary increases?
Data from Quatt Associates

  1. With every employer setting salary increase budgets at 3%, employers are under no pressure to do more than that. Matter-of-fact, you look pretty irresponsible to your board if you set a much larger budget. How would you justify it?
  2. There is evidence that companies have shifted money into bonuses rather than base pay increases. Bonuses are much more nimble than base pay. It’s easier to forgo bonuses if profits are not meeting expectations than to cut salaries or lay people off.
  3. I suspect you will see an increase in the budgets for promotions and an increase in starting salaries (to attract workers) before organizations will increase the salaries for people in their current jobs. Also, employers generally increase the salaries of top performers before they increase salaries for the masses.
  4. I’ve also been wondering how the gig economy would impact employment. I’ve read Americans work fewer hours than we used to. Maybe before we see an uptake in raises, we’ll see an increase in the hours people work.
  5. There is a theory that intuitively makes sense that there is an inverse relationship between unemployment and inflation. It’s called the Phillips Curve. An economist at the federal reserve wrote a paper theorizing that there is a sharp bend in the curve and that we’ll see wage increases soon—when unemployment falls below 4%. It seems plausible. Here's a link – don’t ask me to explain it. (I’ve read the Phillips Curve is dead too, so who knows.)
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