Employees expecting to earn the raise of a lifetime next year may be disappointed. A survey published by global consultant company Aon indicates that 2018 salary increases will likely remain as lackluster as this year’s raises. The survey, which polled around 1,000 companies, indicates that salaries will likely rise by around 3% in 2018, increasing slightly over this year’s average 2.9% base pay bump. The outlook for bonuses and other incentives is equally dismal; spending on variable pay is forecasted to drop to its lowest rate since 2013, at 12.5% of companies’ payroll.
Ken Abosch, compensation analyst at Aon, suggests that the survey results may be somewhat contradictory, considering that businesses seem to be performing well. “Given that we have a strengthening economy, very strong job creation, corporate results are very strong, it’s a little bit puzzling that we’re not seeing pressure on these numbers to try to push them upwards,” Abosch noted.
Abosch believes that the disparity between salary increases and economic growth may result from corporate initiatives to reward employees who deliver exemplary business results. He reports that while budgeting for salary increases remains relatively flat, companies are directing the bulk of their variable pay funds toward incentives that reward star performers. Middling achievers are predicted to bear the brunt of the decrease in overall bonus spending, however, as 40% of companies said they plan on lowering or removing bonuses for less-than-outstanding workers.
The survey also revealed that salary forecasts in the majority of major cities align with the projected 3% pay bump. But some cities, such as New York, Philadelphia, and Houston, indicate bonus pay spending which exceeds the average. Houston businesses anticipate that 14.7% of their payrolls will be spent funding bonuses and incentives, with New York City close behind at 14%, and Philadelphia slightly surpassing the average, at 13%.
Additionally, data from the AFL-CIO reveals that executives don’t seem to share in their workers’ pay stagnancy. Last year’s data places S&P 500 CEOs’ earnings at 335 times that of average workers, which equals a median pay of $11.5 million, according to a separate report by the Associated Press and data firm Equilar. The AFL-CIO’s report also states that this year, CEOs are banking around 347 times the average employee’s pay. The report further clarifies that, “when adjusted for inflation, the average wages of production and nonsupervisory workers has remained stagnant for 50 years.”