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You’re Probably Not Getting a Big Raise Next Year

There are a handful of times in life that a single percentage can make a big difference: that calculus final you forgot to study for, the Olympic trial event you're watching on TV, and the rate of your salary increase. In this case, we're talking about salaries, and the difference between the difference between 4.1 percent and 2.8 percent — and why you may need to get used to the latter.

There are a handful of times in life that a single percentage can make a big difference: that calculus final you forgot to study for, the Olympic trial event you’re watching on TV, and the rate of your salary increase. In this case, we’re talking about salaries, and the difference between the difference between 4.1 percent and 2.8 percent — and why you may need to get used to the latter.

gold bars 

(Photo Credit: New Old Stock)

Those percentages are representative of the rate of increase for salaries from 1996-2000, and 2011-2015 respectively. In other words, the rate of salary increase over the last 20 years has dropped and looks to have plateaued, according to a report from Aon Hewitt.

Do You Know What You're Worth?

What’s interesting about this trend is not necessarily the hopelessness of sluggish raises, but rather how it’s changed the landscape of pay increases.

Employees aren’t getting huge pay increases, it’s true. In fact, according to The PayScale Index, Q3 saw an increase in wages of just 1 percent. In addition, The Real Wage Index, which measures the buying power of earnings after inflation has been taken into account, shows that “real wages” have actually fallen 8 percent since 2006 — meaning that even if your salary increased, you can’t buy as much with it as you could before the recession.

What does this all mean? If you’re not getting paid what you should be, you probably won’t be next year, either – your raise is unlikely to close the gap. But that’s OK, because there are ways that you can use this information to leverage better pay.

Two Words: Variable Pay

The Hewitt reported noted that there’s been an increase by almost 13 percent in variable pay, a.k.a. bonuses and cash rewards.

Of course, the report notes that these increases will go disproportionately to higher-level white collar workers, which isn’t great news for folks on the lower rungs of the corporate ladder. According to that same report, 93 percent of companies offer incentive programs to employees with fixed salaries, but only 43 percent to hourly workers eligible for overtime pay.

For those white collar workers, however, it might be possible to negotiate for potential bonuses when applying for a new job or angling for a promotion at their current employer. Take time to weigh the benefits, and get your negotiating gloves out.

Ultimately, it will be interesting to see if that higher variable affects individual employee performance, or simply gives employers an excuse to underpay employees in dry years.

Sounds Like Someone’s Having a Case of the Doomsdays…

As evidenced by the title of this article, we’re all drawn to the stories that tell us the sky is falling. But let’s not forget that over the last three years, we’ve seen the most consecutive months of job growth since World War II. While you may not be seeing the pay increases of the late ’90s, there are still ways to earn the salary you think you deserve — you just have to get a little creative about it.

Tell Us What You Think

Are you offended by this author’s two-bit economics? How has the lowered rate of salary increase affected you? Tell us in the comments below, or join the conversation on Twitter!

Peter Swanson
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