In case you’re thinking about salary increases in 2011 …
Even in down times with high unemployment, organizations will maintain their merit salary increase programs. ERI Economic Research Institute, Inc., has collected data indicating 2.3 percent as the average of merit increases in the private sector, noting that this is a bit below the all-industry average of about 2.7 percent forecasted by associations and consulting firms.
ERI recommends that organizations consider these key points:
- Not every salaried employee will receive a salary increase. One employee might get 4 percent, while the next may receive 0 percent.
- Even though a merit increase budget exists, the average salary for many jobs may go down because there is always turnover caused by retirements, those finding work elsewhere, internal promotions, salary cuts in 2008-10, etc.
For example:
- If a senior engineer earning $75,000 per year retires, a less experienced engineer may be hired to take his/her place at $35,000 per year.
- If a draftsperson accepts an internal job promotion (e.g., to an estimator position), his or her replacement might be a draftsperson at a lower salary who will receive a modest promotion adjustment or none at all.
- If an enterprise wishes to focus on variable pay or impose further salary cuts, average guaranteed pay levels may tumble.
With 2 percent merit budgets, it doesn’t take much turnover to see the average wage or salary per job go down. Turnover causes average salaries paid per job to slip, often offsetting any growth caused by small merit budgets.
To see a gain in salaries for specific jobs from one year to the next, merit budgets have to be larger than the slippage caused by turnover. ERI researchers, who have been studying wages and salaries since 1968, have seen this before. The difference today is the modest size of salary increases and the magnitude of the economic downturn. ERI recommends organizations consider spreading their salary structure ranges.
ERI salary surveys released July 2010 reported a slowing in salary growth, but not for highly skilled jobs. Also apparent was the decrease in rates at the bottom of salary ranges. The distribution of salary ranges is “spreading,” with the mean and higher earners’ salaries moving slightly upward, and the lower pay levels decreasing dramatically.
