Wage growth picks up in U.S. Rate of pay increases accelerates to 4.3%, first rise since 1990

Workplace

August 17, 1996|By BLOOMBERG BUSINESS NEWS

WASHINGTON -- Growth in U.S. employees' wages and salaries accelerated this year for the first time since 1990, according to an annual survey.

The survey, done by the Scottsdale, Ariz.-based American Compensation Association, showed that the rate of pay increases climbed to 4.3 percent in 1996 from 4.1 percent in 1995.

"Companies have been re-engineering to take certain costs out of their systems," said Wallace Nichols, the association's executive director. As part of this effort, he said, companies have instituted variable pay plans that "produced bonuses for employees" and led to the faster overall growth.

Pay rate increases for 1996 are running about 1.5 percentage points above the rate of inflation, consistent with trends during the past five years, the association said. In 1990, the rate of increases peaked at 5.8 percent.

This year's survey results are in line with other measures of U.S. ++ labor costs. The employment cost index, which many TTC economists consider to be the most accurate measure of wages, salaries and benefits, rose 0.8 percent in the second quarter.

More recent figures, though, indicate that pressure for wage increases is subdued. In July, Americans' weekly earnings adjusted for inflation fell 1.5 percent -- the biggest drop in six months. Average hourly earnings, a gauge that some economists use to monitor inflation, decreased 0.2 percent.

The Federal Reserve has been concerned about higher wages triggering a faster pace of inflation, which could prompt it to raise interest rates. The Fed meets Tuesday to determine interest rate policy, and economists don't expect any change in rates from that meeting.

The association's survey found that pay rates for salaried employees rose 4.1 percent for 1996 and hourly workers' wages advanced 4.0 percent. Canadian employees' pay rates posted a 0.5 percent gain from 1995. For the first time in 23 years of reporting on pay rate increases, the survey included statistics on hourly nonunion employees in the United States. Their pay rose 3.8 percent this year.

The survey was based on information from 3,299 U.S. companies and 269 Canadian firms, and the report gives companies' actual and projected cost-of-living-adjustment rates, merit pay increases and variable pay.

Pub Date: 8/17/96

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