The one-two punch of a weak job market and a sluggish economy will keep most salary increases at a bare minimum in 2012, continuing a pattern of incremental wage growth in recent years.
Salaries will increase by a median of just 2.8 percent in 2012, up slightly from 2.6 percent in 2011 and 2010, according to Towers Watson Data Services.
Analysts for several other research organizations also predict moderate wage growth. For example, researchers for WorldatWork and Hay Group expect a median increase of 3 percent next year. Analysts for the Society for Human Resource Management’s custom benchmarking service project a median salary increase of just 2.3 percent for 2011-12.
When recent inflationary trends are factored in—the Consumer Price Index rose 3.6 percent during the 12-month period from August 2010 to July, for example—the projected median bump in paychecks is essentially a wash.
“It’s a reflection of a lot of risk aversion right now, and there is also not a lot of [employee] attraction and retention pressure,” says Laura Sejen, global practice leader for rewards at Towers Watson Data Services.
Some top performers can expect larger salary increases, though: “For companies that employ a pay-for-performance philosophy, you’ll see some people gaining ground with between 4.5 percent and 6 percent” salary increases, Sejen says. But for every one of those, there’s a lower-performing employee that can expect only a 1 percent or a 1.5 percent increase, she predicts.
While most workers are likely to see their salaries remain fairly flat in 2012, employees in the South Central and West Coast regions may get slightly higher increases, as reported by Towers Watson Data Services and shown in the table below.
Joseph Coombs is a specialist with the Workplace Trends and Forecasting program at SHRM.
Employers Plan for Lean 2012 Pay Increases While Engaging Top Performers, SHRM Online Compensation Discipline, October 2011
Study: Pay for Performance Pays Off, SHRM Online Compensation Discipline, September 2011
Salary Increases Stay Consistent, with Focus on Variable Pay, SHRM Online Compensation Discipline, September 2011
Global Rise in Salary Increase Budgets Projected in 2012, SHRM Online Compensation Discipline, September 2011
Salary Increases Stay Consistent, Focus on Variable Pay, SHRM Online Compensation Discipline, September 2011
Moderate Pay Raises Foreseen, with Fully Funded Bonuses, SHRM Online Compensation Discipline, August 2011
Salary Budgets Lag Behind U.S. Rate of Inflation, SHRM Online Compenation Discipline, August 2011
2012 Compensation Budgets Remain Lean, with Focus on Top Performers, SHRM Online Compensation Discipline, July 2011