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Need a raise? Keep performance high

Helen Palmer Aug 13, 2007

Need a raise? Keep performance high

Helen Palmer Aug 13, 2007


Kai Ryssdal: Most of us are feeling some kind of financial pinch at the moment. High energy prices or rising school fees. Health insurance costs going up twice as fast as inflation is.

But don’t count on the boss to help you out much. We learned today plans for your pay increase are decidedly modest. From WGBH in Boston, Marketplace’s Helen Palmer reports.

Helen Palmer: And the magic number that companies are budgeting for pay raises next year?

Ryan Johnson: Across the board, it’s 3.9 percent.

That’s Ryan Johnson of WorldatWork, a human resource association that’s tracked this figure for 34 years. Johnson says it’s not all bad news — managers will definitely give some workers more.

Johnson: You’re paying for performance, and you’re giving the best performers a 6 or 7 or 8 percent raise. And unfortunately, some people are still gonna to get a 0 or a 1 percent raise, the low performers.

Johnson says that kind of variable pay, or pay for performance, is the norm now for 80 percent of companies.

Gary Chaison, who teaches labor issues at Clark University, calls this survey extremely demoralising for workers, because it shows who gets the lion’s share of the pay raises.

Gary Chaison: An increasingly large share of budgetary allocations of companies are going for the companies’ executives and their senior officers rather than for most workers.

Labor’s lost bargaining power, Chaison says. If you factor in inflation, the U.S. hourly wage has actually fallen over the last five years, even as productivity has shot up.

But Tom Kochan, professor of management at MIT’s Sloane School, says companies are in a tight corner here, too.

Tom Kochan: Companies are struggling because of increased international competition. The cost of health care and other benefit increases are putting pressure on their salary budgets.

That makes it hard for them to raise wages. But Kochan says he doubts that U.S. workers will accept another decade of stagnant pay in the face of skyrocketing executive compensation. Though it’s not obvious what workers can do.

In Boston, I’m Helen Palmer for Marketplace.

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