Salary raises have lagged behind the national rate of inflation for the first time since 1980, according to a study released Monday by the global compensation research firm WorldatWork.
Price inflation for the 12-month period ending in April 2011 was 3.2 percent. At the same time, salary budgets increased only 2.8 percent. The compensation outlook for 2012 isn't looking that bright, either. Surveyed companies have budgeted raises for next year at just 2.9 percent.
In searching for how wages are -- or aren't -- keeping up with inflation, WorldatWork surveyed compensation directors at 2,400 companies including 3M, General Mills, Carlson Cos., Target, Ecolab and Donaldson Cos.
In Minnesota, 373 companies forecast average pay raises of 2.7 percent for 2011 and 2.9 percent for 2012. That's the same as the national rate, meaning that Minnesota is right in line with the national picture, said Alison Avalos, research manager for WorldatWork, a salary tracking firm in Scottsdale, Ariz.
Economists attribute the low salary increases to the lingering effects of the recession: high unemployment and the lack of labor demand in a number of industries.
"With the nation's unemployment rate averaging 9.4 percent between May 2010 and April 2011, salary budget increase trends may only see significant improvement if unemployment decreases," Avalos said. "That would put pressure on employers to raise wages in order to stay competitive."
That pressure already is rising in some industries. WorldatWork spokeswoman Marcia Rhodes noted that the demand for labor is uneven. Mining and oil-and-gas companies are already seeing a shortage of skilled workers nationwide. Surveyed companies in those sectors plan to boost salaries 4.1 percent in 2012.
Locally, labor demands are also uneven. The state's unemployment rate was 6.7 percent in June.
Minnesota added a net 15,200 jobs between May 2010 and May 2011, with the biggest job gains taking place in the professional and business services sector (up 11,400), education and health services (up 7,400) and manufacturing (up 4,500). Heightened labor demands could push those salaries higher, economists said.
During the same period, however, other industries pruned payrolls, making it unlikely that they will boost compensation above the rate of inflation anytime soon.
Over 12 months, Minnesota construction firms cut 6,700 workers, government cut 6,000 and banks, insurance and other financial firms cut 600 jobs.
Dee DePass • 612-673-7725
