Employer Survey Says 2012 Pay Raises Will Rise - A Bit

Large employers are going to loosen the purse strings a little in 2012, and expect to grant pay increases averaging 2.8 percent to salaried, nonexecutive employees. The forecast comes from Towers Watson, a global consulting firm, that surveyed 773 U.S. companies. The 2.8 percent increase is a small increase over the 2.6 percent gains reported in both 2010 and 2011, and executives and nonexempt employees will see similar gains.

The news is even better if you are at the top of your game this year:

According to the survey, workers who receive the highest performance ratings will be in store for median salary increases of 4.5% this year, which is 80% more than workers with average ratings ... (2.5%). Workers with below-average performance ratings will receive median merit increases of 1.4%.

The surveyed employers also say they plan to fully fund bonuses this year, because corporate profits have been so strong.

I wrote about a similar survey from the same firm in February, and that one noted that hiring freezes were coming off. No mention of the pace of hiring this time. This news is fresh this morning so I will try to get an update.

I remember plenty of comments on how out-of-touch the last survey result seemed to be. Let's see: the Bureau of Labor Statistics Employment Situation report from August 5 says that in the 12 months ended July, average hourly earnings for all employees increased by 2.3 percent. That's a little shy of the 2.6 percent raise we were supposed to get back in February.

This wage and salary stuff is a game of inches, though. What's being given at the top line is being eroded at the bottom by inflation. (I'm not sure where the two percent net increase from the temporary cut in the employee portion of Social Security taxes comes in.)

And not that you need to be reminded, but at the last count, the U.S. cost of living is up 3.6 percent in the last 12 months.

So more to the point is that real earnings, adjusted for inflation, have decreased in the last 12 months ended July, again according to the BLS:

Real average hourly earnings fell 1.3 percent, seasonally adjusted, from July 2010 to July 2011. A 0.3 increase in average weekly hours combined with the decrease in real average hourly earnings results in a 1.0 percent decrease in real average weekly earnings during this period.

We're working more and enjoying it less.