Corporate budgets for salary increases are barely keeping up with the rate of inflation in the U.S. this year, and are projected to fall below 3 percent for the first time in over two decades.
According to a study by the research group The Conference Board, the projected 2010 salary structure adjustments for all categories of employees are not expected to top 2.0 percent well below The Conference Boards forecasted inflation rate of 2.6 percent.
"Compensation professionals usually make sure that the salary structures move in lock step with inflation in order to ensure that structures represent market rate for jobs," said John Gibbons, program director of human capital at The Conference Board, in a statement. "They budget increases in a particular year to reward great performance, allowing earnings to exceed inflation and move people up through the ranges. Salary ranges also represent employers' anticipation of what the job market will require. Projections of near zero percent in real terms mean that employers are making the assumption that the salary market is simply not going to move up, regardless of increases in the cost of living."
The revised median forecast of salary increase budgets for 2010 now stands at 2.8 percent for all employee groups except executives (2.75 percent). This is the lowest level in the 25-year history of The Conference Board survey.
This historical low is consistent with historically low growth in government compensation measures. According to the U.S. Bureau of Labor Statistics' Employment Cost Index released last week, in the 12 months to December 2009, total compensation grew by 1.5 percent while consumer prices rose by 2.7 percent, meaning that, adjusted for inflation, total compensation fell by 1.3 percent. The Employment Cost Index's increase is the lowest since the BLS survey began in 1982. Prior to the recession, the 12-month percent change never went below 2.7 percent.
While a turning point in job growth appears to be on the horizon, the study suggests that recovery in compensation is probably a few years away.
