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Salary Increases Hit New Lows

Posted by: Jena McGregor on August 17, 2009

AIG’s new CEO may be taking home a $7 million salary, but average workers, and even average executives, got the lowest pay increase on record last year. Human resources consulting firm Hewitt Associates released its annual salary survey last week, and found that salary increases for 2009 were below 3%, on average, for the first time in the 33 years it has been keeping records.

Base salary raises for non-hourly paid professionals were just 1.8 percent, down from 3.7% last year. Hourly workers raises were 1.9 percent, while executives’ were just 1.4%. Nearly half of companies (48 percent, Hewitt reports) froze salaries last year.

At the same time, however, companies are putting a greater percentage of workers’ pay at risk. “Variable pay” as a percentage of payroll was the highest on record, clocking in at 12.0 percent, up from just five to six percent 15 years ago. In other words, while companies are paying less, they’re also making you work harder and perform better to get the pay you do receive.

Hewitt’s study also had some interesting findings about regional differences in salary increases. Houston is expected to have the largest increase in 2010, at 3.4 percent, followed by Minneapolis/St. Paul and Washington D.C. (each 3 percent). Meanwhile, the lowest increases next year are expected to come in Detroit (2.1 percent), Los Angeles (2.2 percent) and San Francisco (2.4 percent).

There is good news: 2010 is supposed to be better for everyone, at least when it comes to raises. The average base pay increase for salaried workers in 2010, if still below the historical 3% barrier, is projected to jump to 2.7 percent.

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Reader Comments

mr dave

August 18, 2009 08:41 AM

It's an outrage that he will get a 7 million dollar salary when they owe billions to the US taxpayers!!! Pay him 100,000 /yr and if he doesn't like it tell him to TRY and find another job!!!


August 18, 2009 03:20 PM

Things like this are a vicious cycle to the economy. When salaries slow to a trickle, consumers have less overall cash to spend, which causes decreased economic output sales which causes more layoffs, and the cycle repeats. Eventually when salaries completely freeze consumers will stop spending altogether, which is when the economy will completely collapse.


August 18, 2009 06:40 PM

Thank you globalization! This trend will only continue until the average worker is paid a wage comparable to that of a worker in a developing country and lives a corresponding lifestyle. Of course, the elite will continue to see double-digit income growth because the globalization scam only accelerates the natural capitalist process of concentrating wealth. Get ready for your income to drop further when tax rates go up to pay for the billionaire bailouts! In a few years, the only middle-class jobs will be in government and serving the rich. Plan your career accordingly!

Bob Melvin

August 18, 2009 08:46 PM

Unemployment is soaring, pay is down, and jobs are hemorrhaging to offshore locations. The consumer base of the United States is evaporating. It's peculiar to read some BusinessWeek stories that question why sales are down. These stories usually accompany an article about how outsourcing creates jobs. Does anyone still believe that lie?


August 24, 2009 12:42 PM

This is insane. GA state workers will not be getting raises this fiscal year and are enduring up to 10 days of furloughs. I do not feel sorry for any of these individuals, expcially the those on the top tier.

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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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