Study anticipates little compensation inflation

Employers are budgeting for comparatively modest salary increases again this year and in 1999, according to preliminary results of the 1998/1999 Compensation Planning Survey conducted by William M. Mercer Incorporated.

In early survey results, respondents project salary increases of between 4 percent and 4.2 percent in 1999, virtually unchanged from this year's increases and very close to levels of the past several years, according to a news release from Mercer.

This estimate comes from data provided to Mercer by 1,561 mid-size to large employers nationwide.

The data cover 10.9 million working Americans, equal to 10.5 percent of the nation's private sector work force.

The full survey will be released later this fall.

The preliminary survey findings come at a time when economists, Washington policy makers and financial market observers have been keeping a careful eye on wage and salary trends, concerned that labor shortages will drive up pay and spur inflation, the release said.

As in past years, salary increases typically are somewhat higher for executives than for middle managers and clerical/technical employees. (See chart at right.)

"The country's employers appear resolved to hold the line on fixed compensation costs," said Jeffrey J. Fuller, a principal in the Performance and Reward Consulting Practice in Mercer's Kansas City office, in the release. "Competitive realities inhibit companies from increasing the prices of their goods and services to accommodate an increase in compensation costs."

Fuller further attributes the low numbers to altered approaches to incentives.

"Instead of ratcheting up the base pay, manufacturing and service companies are adopting or fine-tuning existing incentive programs to reward outstanding performance," Fuller said.

"This is where the real action is happening. Since 1995, 48 percent of those surveyed have increased the number of employees eligible for incentives, and 22 percent plan to do so in the near future. The days of the annual raise as an entitlement are waning."

William M. Mercer Incorporated, is a human resource management consulting firm with headquarters in New York, and offices in 39 other U.S. cities, including Kansas City.

The firm is the U.S. operating company of William M. Mercer Companies Inc., a worldwide organization serving clients from offices in 104 cities in 27 countries and territories.

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