For the first time in over ten years the average salary budget increase is projected to decrease.
Congruent with the coronavirus pandemic, beginning in the United States in March 2020, unemployment rates saw a drastic rise, jumping over ten percent, between March and April, from 4.4 percent up to 14.7 percent, the highest unemployment rate in the past 72 years. (BLS) Prior to the pandemic, 2019 and 2020 unemployment rates were the lowest the United States has seen in over fifty years, according to a report by BLS detailing monthly unemployment rates from 1948 to present.
Though the rate is declining, reported at 8.4 percent by the end of August 2020, it is still higher than any time within the last eight years. (BLS) Due to the dramatic change, it is not surprising that unemployment rates would have some impact on the 2021 salary budget increase projections.
When 2020 salary budget increase projection numbers were released in 2019, the unemployment rate was under three percent. (BLS)
Per data collected during the pandemic, WorldatWork is projecting the average salary budget increase, overall, for 2021 to be at 2.9 percent. This is a decrease of approximately 0.4 percent from the previous year’s projection.
The impact of the pandemic caused actual salary increases in 2020 to be significantly under the previously projected 3.3 percent for 2020. Both Salary.com and Willis Towers Watson are reporting that average 2020 actual merit increases are projecting to vary in the 2.3 – 2.7 range. Many organizations are freezing salaries in this pandemic-impacted year.
There are a few industries, as expected, that are projected to have average increases above or below the overall projection. Among those with higher projected increases are arts, entertainment, recreation, professional services organizations, scientific and technical services industries, and construction with some boasting projections of up to a 0.5 percent higher. As is typical, the educational industry is expecting the lowest projected increase.
Revenue and/or employee headcount were not significant factors effecting the projections for 2021.
With the impending November 2020 election, and the vast unpredictability of the pandemic, it is hard to determine whether the salary budget increases for 2021 will come to fruition or if they will be more or less than projected.
Although it remains largely unpredictable, it is almost certain that we are unlikely to see the pre-2009 increases in the near future.