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.”

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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 Montreal 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.



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Rod Tocci
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… Read more »