U.S. pay raises: Not so hot, but outpacing inflation

July 30, 2013: 11:37 AM ET

Maybe your latest raise hasn't got you breaking out the bubbly, but cheer up. It probably still beats what managers are getting in some other countries.

Illustration: Images.com/Corbis

Illustration: Images.com/Corbis

FORTUNE -- If your salary is going up by 2.9% in 2013, you're about average for white-collar employees in the U.S., according to a new survey by human resources trade association WorldatWork. That's an increase of about 25% over the 2.2% average pay hike in mid-recession 2009, which was an all-time low since the association's annual poll launched back in 1973.

Compared to peers elsewhere, though, Americans are doing pretty well. Salary budgets for 2014 are shrinking in every country WorldatWork surveyed except the U.S., where next year's projected average salary budget is expected to creep up to 3.1%. That's slightly higher than in Germany and Britain, both at 3%, and Spain and Japan, where 2014 budgets will grow by 2.5%.

"While the U.S. holds steady, other countries appear to be stepping back," says the study, which gathered 5,207 budget estimates from companies in 17 countries whose total employees number about 15 million.

"The gradual increases in the U.S. are good short-term news," observes Kerry Chou, WorldatWork's senior compensation practice leader. "But falling pay budgets in every other industrialized country are not great news for the global economy, on which U.S. economic growth is so dependent.

MORE: America's hourly wage battle heats up

"Salary budgets generally reflect what is going on in the national economy," he adds -- and, in economies more troubled than ours, that can produce some eye-catching numbers. Consider India, where the average raise this year stands at about 10.5%. Sounds great, until you consider that inflation there is running close to 10%, so those pay hikes yield only a tiny 0.5% increase in purchasing power. Brazilian employees are even worse off: The average 2013 raise is 6.8%, with an inflation rate of 6.7%.

By contrast, notes Chou, "Workers in the U.S. are experiencing more buying power, since the average 2013 salary budget increase is 2.9% while the annualized inflation rate, as of April 2013 when we collected the data, was only 1.1%."

The still-spotty economic recovery in the U.S. "creates nervous employers who are hesitant about making significant changes to their fixed costs, but are making an effort to find ways to reward valued employees," notes Chou.

That will probably mean that the 3.1% average raise projected for next year won't be spread around evenly. U.S. companies are planning "increased differentiation based on performance," the survey says, with stellar employees getting a bigger slice of the pie: "In 2014, high performers can expect a 4.1% average pay increase, compared to only 2.7% for middle performers (a 152% difference)."

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About This Author
Anne Fisher
Anne Fisher
Contributor, Fortune

Anne Fisher has been writing "Ask Annie," a column on careers, for Fortune since 1996, helping readers navigate booms, recessions, changing industries, and changing ideas about what's appropriate in the workplace (and beyond). Anne is the author of two books, Wall Street Women (Knopf, 1990) and If My Career's on the Fast Track, Where Do I Get a Road Map? (William Morrow, 2001).

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