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Time to Ask for a Raise? What the PayScale Index Says

PayScale recently released the Q3 2011 PayScale Index. The PayScale Index tracks pay trends by location, industry and job category. A salary index that says how much pay has changed in the last year seems like a great source for figuring out if you should ask for a raise. But, how should you use it?

The PayScale Index is part of what you need to ask for a salary increase, but not everything. In this post, we will discuss how to figure out whether you are due a raise.

Before you can ask for a raise, you need to know what you are worth. Find out with a free PayScale salary report.

Three Key Factors That Change Your Market Price

Your desire for a raise may be simple, "My rent has gone up; I need $200 more per month." However, your needs and wants have little to do with whether your employer will give you a raise, unless you work for a family member or yourself. :-)

While your boss's perception of your value and effectiveness will clearly be important, there are some objective factors that will impact your pay. The first question to answer is, are you worth more in the market today than you were a year ago?

There are three factors that change the market value of you doing your job:

  1. Changes in market supply and demand for your job
    1. Are there more people willing to work than jobs available? When this happens, like construction workers in Las Vegas, wages can actually go down.
    2. Is there a shortage of workers in your specialty? A career that has weathered the recession well is physical therapist. This job requires an advanced degree, and aging baby boomers are creating strong demand.
  2. Increased duties/efficiency/competency in your job
    1. These are all the characteristics of your qualifications and job that go on your resume.
    2. Are you managing a team of 10 now, when you started the year with only two?
    3. Did you learn a valuable new skill, or get a new certification, in the last year?
    4. Are you simply better at your job because of what you have learned in the last year?
  3. General price inflation
    1. Inflation is when the government prints more money to buy the same goods and services.
    2. The consumer price index (CPI) for goods has risen about 3.8 percent over the last year.
    3. The CPI isn't exactly the right inflation; it is the rate of inflation of the price of goods, not employees, but is close enough.
    4. Inflation was a large factor (>10 percent/year in late 70's), but the lower inflation now (0 to 4 percent over the last few years depending on gas prices) makes this less important.

How to Figure Two Raise Factors: The PayScale Index

So you understand the three objective factors that go into any raise discussion. Now you need the data to make the case.

The PayScale Index answers two of the questions. By tracking the changes in wages with all employer, qualification, and responsibility factors held constant (not changing with time), The PayScale Index tracks the changes in market supply and demand for jobs and inflation together.

Strictly speaking, The PayScale Index tracks the nominal (actual dollar) changes in wages. This is made up of two parts: the real (if there were no price inflation) changes in wages, together with the effect of inflation. Hence, it tells for sets of jobs what is happening with factors one and three of the previous section.

As an example, The PayScale Index for the construction trade jobs, like carpenters, plumbers, and electricians, has dropped 1 percent in the last year. During the same time period, inflation has been risen 3.8 percent. Thus, real (inflation adjusted) wages for construction trades nationally are down 4.8 percent (1 + 3.8), because of an over supply of workers given the very weak demand.

Real wages dropping nearly 5 percent in a year is huge - people are not wrong when they say construction is in a depression, not a recession, in many parts of the country.

So find the location, job category, or industry The PayScale Index that most closely match your situation, and use that to set the first and third factors for a raise.

The Last Factor in a Raise: How You Have Changed

The last factor you need to determine if you are due for a raise based on market forces is to decide how much more able you, and how much more responsibility you have, at work.

If you are doing basically the same job, with the same proficiency, for the same employer this year as last, then the answer is you marketable skills have not change, and you are not due any bump for factor two.

However, if you have been in your career for 10 years or less, you are likely stll growing in proficiency, and that is recognized in your market price. For example, wages for a software developer nationally grow from about $50,000 per year to over $80,000 after 10 years, even without a promotion.

This works out to an annual increase of about 5 percent per year for increased competence for software developers, a not uncommon percentage for college grads over the first 10 years or so of working. Human Resources professionals call this a "merit" increase.

If you are a software developer with six years of experience, this 5 percent is added to the general market price increase for information technology workers of 1.2 percent in the last year. You are looking at a decent case for asking for a 6.2 percent annual pay increase this year.

While 6.2 percent is nice, if you haven't checked your worth lately, you could be underpaid by 10 percent or more. For powerful salary data and comparisons customized for your exact position and qualifications, build a complete profile with PayScale's Salary Survey.

Cheers,

Al Lee
Director of Quantitative Analysis, PayScale, Inc.

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