World at Work (the compensation professional organization) released recently a compensation budget survey by Compdata Surveys. The big news: the average preliminary pay increase budget is 3.65% for 2007!
Broad averages like this drive me berserk. It is incredibly precise, but downplays the huge variations that affect individual companies and employees.
There is nothing wrong with this average per se. The problem is how it is used. Companies often use average increases like this as a starting point for deciding what pay raises they will give individual employees.
However, like pay, pay increases are determined by the interaction between the local labor market for specific jobs, individual employees' motivations, and a company's business plan. These microeconomic forces dramatically alter the pay increases a company will need to spend, in order to succeed, from what broad macroeconomic averages say.
Companies are free to set pay increases by these broad averages. That is a business management decision. Of course, companies are also free to fail. :-)
Local variations are what make capitalism fun. In this post, I will look at what data is available, and what forces drive salary increases.
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