Growing Economy and Rising Stock Market
Despite our growing economy and rising stock market, one thing remains consistent – salary budget increase projections. National, industry-wide projections are stagnant, for the fourth consecutive year at a projected median of 3.0 percent (average, 3.2 percent) for 2017-2018. (WorldatWork) According to Willis Towers Watson, variable pay (i.e., discretionary bonuses or annual incentives) are becoming more popular as ways to reward top performers along with increases, with top employees even receiving increases up to 4.5 percent in 2017.
Although increases are at a stalemate, many organizations are planning more significant increases for 2017 than were paid in 2016. The healthcare and chemicals industries are among the top responders that are planning larger increases this year at 24 and 29 percent of organizations, respectively. (CompAnalyst)
Globally, salary increase budgets will, predominately, remain between 2.0 to 5.0 percent (Economic Research Institute) Sources from MarketWatch and Korn Ferry Hay Group cite rising cost of benefits, global competition, and pressure on wage growth as possible causes for the halt on increases.
As we look at total salary budget increases nationally, the average increase, in all fifty (50) states is projected to be between 3.0 – 3.2 percent for 2018. Average actual increases, across the nation, were 2.9 – 3.0 percent in 2017. Industries that are leading in 2018 projected increases include Construction; Professional Scientific, and Technical Services; Wholesale Trade; and “Other Services” reporting projected increases between 3.4 to 3.5 percent. Industries reporting the lowest average projections, approximately 2.6 – 2.9 percent, include Public Administration and Educational Services. (WorldatWork)
Size of organization seems to be a deciding factor for projected 2018 increases with smaller organizations (i.e., with 499 or fewer employees, or $30 million or less in revenue) reporting, on average, increases one- to three- tenths higher than their larger counterparts. (WorldatWork)
As we look forward to 2018, though we may not see larger increases in salary budget, the nation is certainly experiencing growth. According to Economic Research Institute (ERI), our national gross domestic product (GDP) is projected to grow by 2.5 percent, while consumer price increase (CPI) and unemployment rates are expected to slowly decrease to 2.4 and 4.6 percent, respectively.
For the fourth successive year, salary budget increases are expected to remain around the 3.0 – 3.2 percent mark nationally and 2.0 to 4.0 percent across most industries. It is hopeful that if we continue to experience economic growth, we will see projections begin to surpass the 3.0 percent mark and rise to pre-2009 levels in the coming years.