Is the U.S. economy really improving?
Some people want to think it is, but if you look at the early projections for 2015 salary increases and consider such increases as a strong economic indicator, it’s barely growing — at best.
In other words, it’s time to get ready for another 3 percent raise next year.
Consulting giant Mercer just came out with their 2014/2015 U.S. Compensation Planning Survey, and “the average raise in base pay is expected to be 3.0 percent in 2015.” This is roughly in line with the early numbers from the WorldatWork’s 2014-2015 Salary Budget Survey that projects a 3.1 percent salary increase in the U.S. next year, up from the 3.0 percent employees received in 2014.
Spinning mediocre numbers
But still, the amazing part of Mercer’s 2014/2015 U.S. Compensation Planning Survey press release about their survey is this statement:
The average raise in base pay is expected to be 3.0 percent in 2015, up slightly from 2.9 percent in 2014, 2.8 percent in 2013 and 2.7 percent in 2012. These results are indicative of a steadily increasing trend. Additionally, salary increases for top-performing employees — 8 percent of the workforce — will be higher as companies continue to focus on retaining and engaging top talent.”
I don’t know about you, but three-tenths of a percent increase (from 2.7 percent to 3 percent spread over four years) is hardly what any reasonable person would consider “a steadily increasing trend.” And even the salary increases for the top-performing employees (the top 8 percent) is only projected by Mercer to be 4.8 percent, on average.
Less than a 5 percent increase for the absolute top performers? And a 3 percent, on average, for the workforce as a whole? It’s hard to figure why a thoughtful consulting firm like Mercer would be trying so terribly hard to spin such mediocre numbers this way.
Even Fortune magazine, long thought to be a bastion of sober-minded business reporting, seems to buy in to the notion that this salary survey is somehow good news, basically swallowing (and pretty much re-writing) what Mercer is pitching in their press release with absolutely zero skepticism or business insight.
“Workers aren’t catching up at all”
Research shows that Americans are still pretty pessimistic about the current state of the economy, with a recent Wall Street Journal/NBC News poll finding that “71 percent say the recession personally impacted them “a lot” or “just some,” (and) when asked if it’s STILL having an effect on them, 64 percent answer in the affirmative.”
Frankly, I’m getting tired writing about 3 percent average raises (see here, and here, and here) while hearing about all sorts of record corporate profits. And what I wrote about this “new normal” trend of 3 percent raises back in November of 2012 still holds true today as we head towards 2015:
Many will say — and rightly so — that a 3 percent raise is better than no raise, or worse yet, a pay freeze or pay cut, as so many of us (yours truly included) saw just a few short years ago.
While that may be true, it also points to another truth: if 3 percent is the average salary increase and “the new normal,” workers aren’t catching up at all for the cuts they endured during the worst of the recession. Plus, a 3 percent average hike means that top performers are probably only getting a 5 or 6 percent increase, and that’s hardly enough to reward them for their great work.”
OK, so I was off about top performers getting 5 or 6 percent (which they would love compared to that projected 4.8 percent next year by Mercer). So, what does this trend mean?
It means that despite all the things you hear about how companies are worried about retention and keeping their best people, and how there is a huge looming talent shortage as the Baby Boomers depart the scene, organizations really don’t believe in investing in their larger workforce — at least not right now.
3% is as good as it is going to get
It’s hard to draw any other conclusion after four plus years of 3 percent average increases following the worst (and longest) recession since the Great Depression.
This also means that CareerBuilder’s January projection that 21 percent of workers plan to change jobs this year might end up being a little low.
I expect that number to go up a lot more in the near future as workers finally get the message that America’s employers are sending them — that a 3 percent salary increase, sadly, is about as good as it is going to get.
If you want more, you better go out and find it yourself, because you likely aren’t going to get it in your current situation.