Salary increases in the US are expected to average 4% for both 2000 and 2001 for most employee and industry groups, according to The Conference Board's annual salary survey.
Although the salary increases are greater than predicted inflation rates of 2.7% for the same period, the real earnings gain margin is getting smaller.
WorldatWork (formerly the American Compensation Association) sees two countervailing pressures in the offing:
Stern & Associate's "inside" information suggests that dot-com layoffs are only having a limited effect on *some* jobs at the lower end of the knowledge spectrum. In general, the dot-com market is highly volatile and will probably become more so.
Macro averages of the type reported by The Conference Board and other sources, hide profound variations linked to areas of expertise, experience, geography, industry and different total reward strategies.
Merit pay increases for IT and other specialized areas in the New Economy will continue to outdistance the increases for other occupations.
Recent surveys of engineering jobs in *all* industries, conducted by The American Association of Engineering Societies, ECS Watson-Wyatt, and Professional Engineer Placements, report that actual median pay has increased 10% between 1998 and 1999.
To confuse the picture even more, companies are continuing to offer bonuses to employees at progressively lower levels of the organization, representing increasingly larger percentages of total cash compensation. Additionally, more companies are using retention bonus plans, project bonuses, and other alternative reward programs.
Some companies (especially the dot-coms) with underwater options, are seeking cash remedies to offset the option blues. This is resulting in even greater merit pay increase variation from company to company.
Given the above, you can expect to be using a liberal amount of Kentucky windage when deciding upon annual pay increases.
While it is important to track projections of base pay increases, remember to keep your eye on *total* cash compensation and *total* rewards. It will take more than economic rewards to retain the best, the brightest, and the doing-OK gang.
The name of game is "the employee value proposition" (EVP). It takes more than money and benefits to attract and retain talented workers these days.