Employers Holding Back on Pay Raises

Employers are dispensing notably smaller pay raises this year -- well below the 4%-plus increases routine before the economy lost its footing -- and workers should not expect much improvement in 2004.

Companies tapped in a pair of surveys have budgeted pay increases averaging 3.3% to 3.5% this year and plan about the same for next year, the smallest raises for workers since at least the mid-1970s.

The belt-tightening reflects employer efforts to balance pay with rising worker health-care bills and pension costs in a business climate that has made it difficult to raise prices for their own products, according to a survey by Mercer Human Resources Consulting.

Those pressures are layered on top of employers’ continued caution about the lingering downturn and an anemic job market with an oversupply of workers, says the Mercer survey and another by the Conference Board, a private research group.

Last year, when raises averaged 3.8% according to the Mercer survey and 4% according to the Conference Board -- inflation was at an extremely low 1.6%, helping to make up for the limited pay increases.