The new year probably won’t be the best time to ask for new raises, with economists and recent studies predicting widespread payroll cuts.
More than 7 million Americans will see the lowest pay increases in three decades, according to a December survey by Illinois-based Hewitt Associates. The average worker will receive on average a 3 percent increase in pay, down from 3.8 percent in a July survey. Salaried exempt employees will see an average increase of 2.5 percent.
The data comes as the nationwide unemployment rate rose to 6.7 percent in November, up from 4.7 percent a year ago. In Maryland, the rate climbed to 5.3 percent from 3.6 percent in 2007.
Expected wage increases are closely linked to general economic performance — the more individuals have to spend, the stronger the economy is, but the reverse is also true.
“People naturally see that the economy is in a recession and they can’t expect high wages,” said Richard Clinch, an economist with the University of Baltimore. “But that said, wage growth is an impetus to economic growth. It’s a chicken-or-the-egg situation.”
The Hewitt study surveyed 640 companies, 50 percent of which said they had already cut their salary budgets. Another 25 percent said they were considering doing so.
National unemployment hit a 15-year high in November at 6.7 percent, while Maryland unemployment rose to 5.3 percent, a 12-year high. Job security concerns were a key factor in driving consumer confidence to an all-time low, according to the Conference Board’s Consumer Confidence Index, released Wednesday.
In that survey, 42 percent of respondents said jobs were “hard to get,” up from 37.1 percent in November. Those claiming business conditions were “bad” grew to 46 percent from 40.6 percent a month before.
Maryland wages may fare a little better than those of other areas, thanks to the state’s large federal government presence, Clinch said.
“Because of the dominance of government in our economy, I think you’ll see personal wages and salaries grow more than the national average,” he said. “The region will do better than the nation as a whole because we do not have industries like auto manufacturing that are in dire straits.”
