Dive Brief:
- U.S. workers could see a slight uptick in pay next year due to a tight labor market and low unemployment, according to a new Willis Towers Watson (WTW) survey. Employers in the survey said top performers are projected to receive the biggest wage increases and discretionary bonuses next year in an effort to reward and retain them.
- Exempt, nonmanagement employees could see average pay increases of 3.1% in 2019 over this year's 3.0% average increase. Nonexempt hourly employees also can expect increases of 3.0% next year compared to 2.9% this year. Executives' increases are expected to be smaller in 2019: 3.1% versus this year's 3.2%. Just 3% of employers in the survey plan on freezing salaries in 2019.
- The survey also found that annual performance bonuses, which generally are based on company and employee performance goals, are expected to remain the same or decline slightly for most worker groups in 2019.
Dive Insight:
News of projected salary increases may seem natural given research that employees are still by and large putting higher salaries at the top of the list in considering job offers. Employers face labor shortages and seem willing to move the needle slightly on wages to remain competitive.
But these same increases must be put into the context of longer-term wage stagnation, an economic reality for the U.S. According to the New York Fed, wage growth expectations slipped from 2.7% in June to 2.4% in July, while inflation remained steady at 3.0%. Should this downward trend play out, it could eat up any increases in pay. Employers might need to readjust their budgets to make salary increases meaningful to workers.
At the same time, employers might argue that slow wage increases don't take into consideration increases in benefits spending. According to a recent large employer survey by the National Business Group on Health, healthcare benefits alone could exceed $15,000 per employee in 2019, an increase of $1,500 from the average cost per employee in 2017. In other benefit categories, however, voluntary benefits could provide a value-add to employment without necessarily driving up cost to the employer.
