PAY raises haven't been slowed by economic woes; 7.3 percent gain in first quarter

Thursday, August 9th 2001, 12:00 am
By: News On 6

NEW YORK (AP) _ The slowdown in the economy hasn't yet eroded the steady pay gains enjoyed by U.S. workers, according to two new reports, but more employers are looking at ways to trim salary and wage increases in the months ahead.

Workers nationwide netted total salary and wage gains of 7.3 percent in the first quarter of this year, compared with the same period a year ago, figures from the federal government's Bureau of Economic Analysis show.

Those gains _ the sum of all base pay, overtime, bonuses and other wages _ are down slightly from the 7.8 percent overall increase of a year ago, according to calculations by, a West Chester, Pa. forecasting firm.

Employers say they plan individual pay increases this year and next averaging just over 4 percent, reports William M. Mercer Inc., a human resources consultant that surveyed 1,500 companies about such practices. The firms were surveyed early this year.

But many firms are now growing wary of an extended slowdown and are considering ways to rein in salaries, Mercer's study found.

``As the year progresses, we find that more of them are thinking about alternative actions in case third and fourth quarter performance does not meet expectations,'' said Steven Gross, who heads Mercer's compensation consulting practice.

Many major employers have used layoffs to cut costs, but have been reluctant to penalize remaining workers, analysts said.

But pressed to cut spending, some companies are beginning to stretch out the time between raises, scale them back or give workers one-time lump sums instead of raises to avoid locking in costs, Gross said.

Many companies already pushed their merit raises from January to April, without actually cutting the amounts of those raises, said Janet Fuersich, a compensation consultant with Towers Perrin.

While most companies are sticking by budgets that raise total merit pay by 4.5 percent for rank-and-file workers, those will not be doled out as evenly as in the past. Instead, profit pressures will mean bigger raises for stronger performers, she said.

So far, however, many paychecks do not reflect the corporate frugality touched off by the downturn.

Government figures show that the total wage and salary pool increased across the country for the year that ended in March. The increases were largest in the Rocky Mountain states, lead by Colorado, where paychecks averaged 13.3 percent gains in the first quarter of 2001 compared with the same time a year ago.

The smallest gains came in the Great Lakes states, where increases in pay averaged about 4 percent.