Posted by Peter DeBellis on August 20, 2018.
Earlier this week, World at Work, a nonprofit association of compensation and total rewards professionals, reported that its 2018–19 Salary Budget Survey showed a 3.1 percent average salary increase budget for 2018 in the U.S., barely breaking a four-year streak of 3 percent per year from 2014 to 2017.1 But given the impact of inflation, real wages have been stagnant for some time—3.1 percent is not cause for celebration.
The chart below, courtesy of the U.S. Bureau of Labor Statistics, shows the increase in nominal hourly earnings (like the salary budget numbers reported by World at Work) versus a lack of growth in “real” earnings (accounting for changes in the Consumer Price Index along the way) since the Great Recession. As you’ll see on the chart, paychecks may be getting larger, but employees probably don’t feel the difference.2
Average Hourly Earnings vs. Weekly Real Earnings
Source: U.S. Bureau of Labor Statistics, 2018.
But all is not lost. There was one glimmer of hope for employees in the World at Work data: both the percentage of employees promoted last year and the average promotional salary increase they received are on the rise. In 2017, 8.6 percent of employees were promoted (versus 7.9 percent in 2016) and the average salary increase they received was 8.7 percent (versus 8.4 percent in 2016).
This data could be a leading indicator reflecting the impact of a tight labor market that has not yet shown up in broader wage data. The increasing trend of promotions may be due to:
- Companies promoting from within in hopes of avoiding having to source for new talent in a hot market that has quit rates creeping up in the U.S.3
- The “brain drain” of retiring Baby Boomers pushing younger workers into broader (and more lucrative) roles sooner than in the past
- Growing organizations and new ways of working creating new leadership opportunities
More than likely, the growing promotion rates reflect a combination of these three factors and many others—but the net result is an employment trend worth watching.
Bersin’s High-Impact Rewards research delves into the ways that high-performing companies are evolving their total rewards approaches to keep pace with trends such as these in the new world of work, including crafting rewards offerings that can both help retain valued workers and attract needed new talent. Members can login at Bersin.com to read our latest perspectives on these topics and many more.
Pete leads total rewards research for Bersin, Deloitte Consulting LLP. Pete has a deep understanding of the various tools organizations use to attract, motivate, develop, and retain talent—from compensation and benefits to worker wellbeing programs to experience and actualization opportunities, among others. His experience, gained as in-house rewards professional for public companies and as a consultant, helps him understand the critical linkages between total rewards, HR strategy, and overarching business objectives. Pete holds a bachelor of science degree in industrial and labor relations from Cornell University.
1 “Promotions, Promotional Raises Surpass Growth of Salary Increase Budgets,” WorldatWork / Alicia Jenkins and Lindsay Strack, July 31, 2018, https://www.worldatwork.org/workspan/articles/promotions-promotional-raises-surpass-growth-of-salary-increase-budgets.
2 “FRED Graph,” Federal Reserve Bank of St. Louis, July 2018, https://fred.stlouisfed.org/graph/?g=i8LA#0.
3 “Job Openings and Labor Turnover Survey News Release,” U.S. Bureau of Labor Statistics, August 7, 2018, https://www.bls.gov/news.release/jolts.htm.