One for You, Two for Me

A major component in the ongoing merciless slog that is our economy is employment. Unemployment remains uncomfortably high at or around 9.1%, and the problem is that it has been there for a long time, perhaps the longest extended stretch of joblessness in this country since the Great Depression.

That alone is enough to discourage anybody, but especially in the United States, where working isn’t just a means to gain wealth and provide for one’s family (though it is certainly that). It is also part of our identity. We are a working culture. When we cannot work, we lose a sense of purpose. It is a great strength of ours as a people, but it is also a liability during lean times, when it causes us all to get a little crazy.

And while it is far better to have a job than not, things are tight even for the gainfully employed, and according to Compensation Planning for 2012, a survey by Buck Consultants, a human resources and benefits management firm, things are not likely to get much better in 2012. The survey canvases some 280 firms across all industries, and was conducted in August.

The average merit pay rase for next year is expected to be 2.8%, which is at or just below estimates for the rate of inflation also expected for next year. The expected increases are more or less on par with averages for 2010 and 2009. What is interesting is that since last year, only 80% of respondents said they had a pay-for-performance philosophy. This is down from 87% the year before. When I followed up with buck, it was explained to me that increasingly, firms are using variable compensation, such as bonuses, to reward employees for excellent performance, rather than give them larger pay increases. While this does give companies more flexibility when doling out their limited resources to reward its staff for a job well done, cynical employees, especially younger ones looking to get their careers going, are quick to remark that a big one-year bump ultimately translates into a whole lot less than a compounding pay increase.

This is worth noting, since the Buck survey also mentioned that among the respondents, their top talent-related priorities were retaining talent and employee engagement. With low pay grade increases prevalent, what employers are also making great use of are non-compensation inceitives, such as new career opportunities and additional training, things employees can keep with them for their entire careers. 

I get that companies want to take the slow and steady approach in what remains a hellacious grind of an economy. But the reality is this: corporate America is currently sitting on something like $2 trillion it is unwilling to invest anywhere, not even itself. Now, I have taken flak on this in the past, and have been called a socialist, so ley me make something clear: the corporate sector has no obligation to hire anybody. It hires to make its own profits the best they can be, period. While our society needs jobs to be at peak efficiency, businesses must only hire when it makes for them to do so, not out of any obligation that falls beyond their fiduciary responsibility to their stakeholders, both internal and external.

So why am I bugging out about flush corporate treasuries? Because according to the Buck survey, promotion increases for C-level executives are likely to come in at 5.7% – about twice that of the rank and file. Increases for VP-level positions are looking to average 7.3%. Now, Buck did confirm to me that these increases, while largely merit-based, also include any promotions within the position. Say, from vice president to senior vice president, or from one level of the C-Suite to another. Just the same, the facts are clear: the higher you go, the bigger the raise.