Posted on: Wednesday, July 30, 2003

Surveys find workers can expect smaller pay raises

By Adam Geller
Associated Press

NEW YORK — Employers are dispensing notably smaller pay raises this year — well below the 4 percent-plus increases routine before the economy lost its footing — and workers should not expect much improvement next year.

Companies tapped in a pair of surveys have budgeted pay increases averaging 3.3 percent to 3.5 percent this year and plan about the same next year, the smallest raises for workers since at least the mid-1970s.

The belt-tightening reflects employer efforts to balance pay with rising worker healthcare bills and pension costs in a business climate that has made it difficult to raise prices for their products, according to a survey by Mercer Human Resources Consulting.

Those pressures are layered on top of employers' continued caution about the lingering downturn and an anemic job market with an oversupply of workers, says the Mercer survey and another put out last month by the Conference Board, a private research group.

During the past 10 years, pay increases have topped the rate of inflation by between 1.1 percent and 2.6 percent, according to the Mercer survey.

Inflation is expected to hover around 2.6 percent this year and 2.7 percent next year, limiting how much more people will really be taking home.

"It's getting a little bit tight," said Charles Peck, compensation specialist with the Conference Board.