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The Employers Association of the NorthEast is predicting that the region’s employees will see their pay rise 2.2 percent on average in 2012, the same increase as this year.
Depending on the industry and type of employee, the association foresees significant variation in the increases, from 0.7 percent for construction company executives to 3 percent for leaders of durable goods manufacturers.
Bob Carnegie, the head of Upton human resources consulting firm R. Carnegie Associates Inc., says his clients are looking at more varied raises than that, depending on their industries and each company’s particular situation.
Carnegie said the technology companies he works with are planning increases of 3.5 to 4 percent, and green energy is a particularly booming sector, with 7 or 8 percent raises in some cases. Nonprofits’ raises tend to be lower, or sometimes nonexistent, he said.
Other analysts also predict less-than-spectacular pay increases. Hay Group, a global consultancy, says the median pay increase for 2012 will be 3 percent, similar to last year but down from annual increases of around 4 percent seen between 2005 and 2008. Staffing firm Robert Half International predicts an average pay hike of 3.4 percent in the professional jobs it tracks, with average raises ranging from 1.9 percent for lawyers to 4.5 percent for information technology professionals.
Of course, wage changes don’t exist in a vacuum. The U.S. Bureau of Labor Statistics shows private-sector wages rose 1.7 percent in the year that ended Sept. 30, 2011, more than in 2008 or 2009. But inflation was much higher too, meaning that, on average, workers actually saw a drop in pay of 2.2 percent.
Jim Heim, managing director at the Southborough office of compensation consultancy Pearl Meyer and Partners, said the employers he works with, largely publicly traded technology companies, are typically giving 3 percent raises, down from the 4 percent that was typical before the recession.
But Heim said the bigger change is that, thanks to a 2009 federal law that gives shareholders more control over compensation, the companies are much more focused on merit pay, both for executives and for regular employees. He said it’s no longer uncommon for one executive who reports to a CEO to get a 6-percent increase, while a peer at the same level gets nothing. Bonuses, which typically make up the bulk of high-level executives’ compensation, are also coming under greater scrutiny.
At the lower levels of a company, Heim said, middle managers are being forced to examine data, determine exactly what their subordinates are contributing to the company’s value and then set their compensation accordingly.
“Whether they’re unpleasant conversations or not, they’re being required by the management,” he said.
Carnegie said some employers he works with, particularly in the technology sector, also offer better raises as incentives for good performance. Other types of employers, including nonprofits, are more likely to give standard across-the-board raises, he said.
Carnegie said the people in any given company who are most likely to get good-sized raises are those with specific, in-demand skills who might be able to get better offers elsewhere. But that kind of threat is rarer than it once was, he said. In the heyday of big technology employers like Digital Equipment Corp. in the 1980s and ’90s, he said, many employees would shop for jobs up and down the I-495 corridor.
“You’re not seeing that, even in some of the technology businesses [now],” he said. “People are hanging in there and hoping they’re going to get recognized.”
Heim said lower-level employees are definitely in a weak bargaining position, with many unemployed peers and recent college graduates available to take their jobs. That means people in those entry-level positions may not get the same raises as people with more specialized skills.
“It will absolutely seem like a case of the rich getting richer,” Heim said.
Meanwhile, Carnegie said some companies he works with are deferring raises altogether until they have a better sense of their financial positions, sometime in the middle of 2012. Some are doing this for the first time this year, he said, but one nonprofit he works with hasn’t given a raise in three years. He said the organization has still been able to retain workers, perhaps because they’re more committed to its mission than to a big paycheck.
Carnegie said he thinks most employers that skip raises do so out of necessity, not because they know the high unemployment rate makes it hard for workers to find a better deal elsewhere.
“I don’t think they’re that mean-spirited,” he said. “I think they are, on average, wanting to do something.”
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Worcester Business Journal presents a special commemorative edition celebrating the 300th anniversary of the city of Worcester. This landmark publication covers the city and region’s rich history of growth and innovation.
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