Salary Increases Expected to Stay Below 4% This Ye
New York, NY, June 6--Salary budgets will average only 3.5 percent this year and will remain at this level next year as well, according to a report from the Conference Board.
For the third consecutive year, salary increases are below 4 percent as employers continue to show caution regarding salary increase budgets.
"The recovery from the economic downturn appears to be leveling off, and U.S. companies are paying close attention to cost control," says Charles Peck, compensation specialist, The Conference Board. "This continued caution is reflected in the pattern of salary increase budgets this year compared with last year’s projections." For all industries as a group, 2005 salary budgets are averaging 3.5 percent, virtually identical to last year’s projections. This is true for all three employee groups: nonexempt, exempt and executive.
For all but one of the individual industry groups, actual 2005 budgets were practically the same as what was projected. The lone exception: the insurance industry, where salary budgets of 3.5 percent were below the 3.7 to 3.9 percent that had been forecasted.
This year is the third time in 11 years that median increases have fallen significantly below 4 percent.
"Inflation is the wild card in this game," says Peck. Illustrating Micawber’s rule, The Conference Board currently projects a 3.1 percent rise in inflation for 2005, which is below the average 2005 budget of 3.5 percent. However, the 4 percent inflation rise projected for 2006 would effectively wipe out the 3.5 percent forecasted pay gain.
Median salary structure adjustments dropped below what had been the traditional 3 percent increase for the fourth year in a row. Salary structure adjustment is the movement, up or down, of pay ranges established by organizations for the hierarchy of jobs.
