Pay raises are coming -- but they won't be much

By Ben Rooney, staff reporter

NEW YORK ( -- The weak economy will continue to keep a lid on salary increases this year, but the outlook for next year is slightly better, according to a survey released Tuesday.

The Conference Board, a New York-based business research group, said the median budget for salary increases -- meaning the percentage of payroll that companies set aside for raises -- stands at 2.5% for the second straight year in 2010.

But the figure is expected to increase modestly to 3% in 2011, according a survey of over 300 companies the group conducted in April.

"This less-than-robust increase is an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets to a level consistent with a healthy economy," Christopher Woock, a human capital researcher at The Conference Board, said in a statement.

While the economy has shown some signs of improvement from a deep downturn, the outlook remains uncertain and many employers are reluctant to ramp up hiring.

U.S. gross domestic product, the broadest measure of economic activity, resumed growth in the third quarter of 2009 after shrinking for a full year. But the government said last month that GDP grew at a slightly slower pace than originally estimated in the first quarter of 2010.

In addition, the job market remains depressed. In June, the government said the economy lost jobs for the first time this year, as thousands of Census jobs ended. The jobless rate dipped slightly last month but many economists expect it to remain above 9% for the remainder of the year.

According to Tuesday's report, the transportation and insurance industries are expected to have the smallest median budgets for salary increases in 2011.

By contrast, the services industry and the financial sector are forecast to have the largest gains in budgets for salary increases.

Overall, the survey found little variation across industries. No employee group in any industry is projected to exceed the overall median increase of 3% next year.

But the news is not all grim. The weak economy is expected to keep consumer prices in check, which could boost the purchasing power of even a small salary increase.

"There appears to be little risk of inflation eroding the real value of the increase," said Woock. To top of page

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