CFO Corner: The Q3 PayScale Index shows real wages down while corporate profits are up

Laleh Hassibi, PayScale

The Q3 PayScale Index has evolved, now offering more enhanced compensation trend analysis than previously available. Q3 2013 marks the first time The PayScale Index has revealed shifts in ‘real wages’ by analyzing statistics from the Consumer Price Index together with PayScale’s rich compensation data. The Q3 PayScale Index is also the first predictive Index; projecting only modest national wage growth of 0.1 percent in the U.S. for Q4. One more exciting addition to the existing Canadian and US trend analyses is the analysis of UK Compensation trends.

“Real wage growth is a key indicator of economic health and employee satisfaction because it blends inflation together with nominal wages,” said Katie Bardaro, lead economist at PayScale. “The results of our Q3 survey aren’t encouraging for employees, showing real wages have actually declined over the past seven years. This means the income for a typical full-time worker buys less today than it did in 2006. We also anticipate the trend of negative to low real wage growth will continue in Q4.”

The decrease in real wages comes at a time when U.S. corporate profits are at a record high. According to the Q3 gross domestic product (GDP) report from the U.S. Commerce Department, corporate earnings were up 18.6 percent over the past year and corporate profits represented the highest percentage of GDP in history.

“Wages continue to be relatively flat, even as corporate profits are dramatically increasing,” said Bardaro. “Our research shows turnover increases and productivity decreases when employees feel undervalued, so we believe this is the time for businesses to reassess their compensation strategy to ensure long-term success.”

Key findings from The Q3 PayScale Index:

  • Nominal wages have not kept pace with inflation; real wages have dropped almost 7 percent since 2006, meaning the buying power of the average U.S. worker is lower than it was seven years ago.
  • The prediction for Q4 is only a very slight increase to nominal wages of 0.1 percent, resulting in annual wage growth of just 0.8 percent.
  • Changes in nominal wage growth for Q3 were a mixed bag, as wage growth was not seen across the board.
  • Previous high-performing industries recovered from their Q2 decline and are back on top this quarter:  oil & gas exploration, biotech, and healthcare.
  • Media and publishing jobs hold the top spot for annual nominal wage growth at 3.9 percent.
  • San Francisco, Baltimore, and Seattle are the U.S. metro areas that experienced the highest year-over-year growth with more than 2.5 percent.
  • Wages in the UK increased 9.3 percent since 2006, compared to 8.2 percent in the US for the same period. The results show U.K. wage recovery has been more rapid than recovery in the US.
  • After a slow recovery in Q2, many of Canada’s six major metro areas experienced a Q3 wage decline. Edmonton, typically dominant for annual wage growth, fell to number three with Montréal rising to the top spot.

As an organization, you can request a PayScale Index compensation trend report customized to your geography, industry and business here.

About The PayScale Index:

The PayScale Index follows changes in total cash compensation for full-time, private industry employees in the US, Canada, and the UK.

For more information on the PayScale Index, please visit the methodology and FAQ pages.

1 Comment

  1. 1 Rod Tocci 09 Oct
    Employers that describe themselves as the leader in their business
    enterprise as a first statement are really saying that to work for them is a bragging
    badge statement of the finest caliber. 
    It is a sales pitch to conjure up the status symbol in the heart of the
    applicant.  I would rather drive a five-year-old
    Ford than a new BMW when it comes to practicality.  A job should be no different.  If you are a professional with record of good
    to excellent profitability, then the company is living off your badge you would
    think.  You take your badge wherever you
    go.  When a company has lost too many key
    people, they break down.  I never heard
    of a broken company being a leader.  Where
    are all the fowler companiesJ?

    When it comes to wages, you have to understand that the new
    hires set the pay scale.  As long as there
    is panic stricken new hires accepting bargain-basement start-up salaries, then
    expect the offered salary range to not change.  Curse your neighbor; yourself too; if the
    price does not fit the job, just say no and forget about it, you owe it to your
    neighbor.  The age-old saying is still
    provable, “If you do not get it going in the door, you won’t get it going out”.  Makes the employee just end up looking for
    that better job opportunity.  A ridiculously
    expensive proposition for the employer and the worker.

    Here is a hint, a gift for those that are looking for opportunity.  All employers have system problems that need
    improvement.  If an employer is looking
    to hire a professional that is skilled in system/process improvement; they are
    saying that the current staff is deficient. 
    They are looking to get control of their problems.  Now you know what to sell at the interview.

    The article describes many excuses for not being interested
    in an applicant.  The one screening
    attribute that cannot be overcome is that the applicants name and work history
    is easily researchable using modern technology. 
    Be aware that employers know your age after preliminary research.  If you are over fifty-five and you get an interview,
    your age should not need to be topic of discussion.  If your over fifty-five and receive no response;
    there can be many reasons.  Do not hurt
    your reputation by signaling it was age discrimination; to do so says only negative
    thing about you.

    Thank you for allowing my comments.



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