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The Projected Standstill
by Lauren E.B. Belcher 09/21/2016

Locked in a standstill, salary budget increase projections for 2017 are remaining at 3.1 percent (average) overall (3.0 percent, median), according to WorldatWork. These projections are identical to the 2016 projected numbers. However, actual 2016 budget increases were lower by approximately 0.1 percent with the average overall increase at 3.0 percent.

2017 is the third consecutive year to have projected salary budget increases at 3.1 percent. WorldatWork attributes this to a slow, steady growth in increases being reported since the recession. Other factors effecting the halt in rising projections include slight increases in “zero-percent increases” being reported.

Though salary increase projections are failing to rise, WorldatWork reports that the effects are being offset through programs and practices that allow employees more work-life balance opportunity. In turn, demand for wage growth is lessened. WorldatWork also indicates that, although significant changes were made during the final Fair Labor Standards Act (FLSA) ruling in May 2016, plans for salary budget increases were not impacted by the new standards that were put in place. In fact, surprisingly, 95 to 98 percent of WorldatWorks’s survey respondents stated that their organization’s actual 2016 and projected 2017 salary budget increases were not affected by the new FLSA rules.

Seemingly not effected by the recent FLSA rulings, there is one factor that could be driving the projections to remain halted. According to the U.S. Bureau of Labor Statistics (BLS) the United States’ unemployment rates have dropped by just over 4.5 percent over the past eleven years. While typically, the decrease in unemployment would drive wage growth, U.S. economic growth is countering this effect. It has been reported, by BLS and The Society for Human Resource Management (SHRM), that the economic growth in 2016, thus far, is merely 2.0 percent. It appears, the balance between the decline in unemployment versus the slow economic growth will have to resolve before we will begin to see any significant increases in salary budget projections.

Comparable to WorldatWork’s projections, The Conference Board, SHRM, Willis Towers Watson, and the Korn Ferry Hay Group, all predict that salary budget increases will remain between 3.0 to 3.1 percent for 2017.

However, projections are expected to vary based on industry, while remaining fairly stagnant, at 3.0 to 3.1 percent (average) across all employee categories including “Nonexempt Hourly Nonunion,” “Nonexempt Salaried,” “Exempt Salaried,” and “Officers/Executives.” Perhaps the lowest salary increase projection for 2017 is within the “Mining, Quarrying, and Oil and Gas Extraction” industry with projections falling from 2.5 percent in 2016 to a mere 1.3 percent for 2017 (WorldatWork). Reported zero percent increases and low oil prices are possible contributing factors, according to WorldatWork. The “Telecommunications” industry is expected to see the most growth in 2017, with projections at 3.7 percent – an increase of approximately 0.3 percent from the actual 2016 increases.

Regionally, across the central, eastern, southern, and western parts of the United States, projections are aligned with the overall average projection of 3.1 percent (average) and 3.0 percent (median) across all employee categories. One exception is for “Officers/Executives” within the western United States where 2017 projections are approximately 3.2 percent (average), just slightly above the overall projections.

For the third year in a row, sources seem to agree, the 2017 salary budget increases will remain between 3.0 and 3.1 percent nationally and within 2.0 to 4.0 percent across most industries within the United States. As was reported in previous years, there is still a major lack in economic growth working against salary increase projections rising to levels near or above the pre-2009 recession. Until economic growth is restored, it appears we can expect projections to remain at a standstill around 3.0 to 3.1 percent.

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