Housing Bubble

Salary increases fall for first time in a decade

June 23, 2003

NEW YORK, /PRNewswire/ -- For the first time in 10 years, salary increase budgets across America have declined significantly, The Conference Board reports today.

"U.S. business continues to struggle back from the recent economic downturn," says Charles Peck, The Conference Board's compensation specialist. "Caution is the prevailing mood with companies paying careful attention to controlling costs."

The pattern of 2003 pay increase budgets compared with last year's projections reflects this caution. For all industries as a group, actual 2003 salary budgets are averaging 3.5 percent, down from the previously projected 4 percent. This was true for all three employee groups: nonexempt, exempt and executive. Results were practically identical for the individual industry categories with the exception of the insurance industry. The insurance group is at or near 4.0 percent for all employee groups in both years.

This is the first time in ten years that median increases have moved significantly below 4 percent. And, according to the projections for 2004, next year will be the same. The only exception is the insurance group, which is virtually 4.0 percent in both years.

Some companies have taken actions which have the effect of reducing the amount spent for salary increases and are not reflected in the size of the budget. These actions include: delayed merit increases, hiring freezes, furloughs and layoffs.

Inflation is running almost a point less than salary increase budgets. The Conference Board currently projects a 2.6 percent rise in the Consumer Price Index for 2003 compared with a 3.5 percent average salary budget. The 2.7 percent inflation increase projected for 2004 maintains this differential.

Source: The Conference Board