This year has been rough for the many companies that have struggled without growth or pricing power. Those companies in particularly troubled sectors have also continued to experience layoffs and wage compression.
So how has employee compensation fared, given this difficult operating environment for employers? According to the Employee Outlook Index -- a joint effort of UBS and The Â鶹´«Ã½AV Organization* -- employees at private sector, for-profit companies have done pretty well in 2002.
Total Compensation Has Increased
A total of 84% of employees at private sector, for-profit companies say that their total compensation in 2002 will be as high (29%) or higher (55%) than it was in 2001. Just 14% say their compensation will be lower this year. Given the ongoing economic struggles in so many industries, overall employee compensation seems to have held up remarkably well.
Incentive Compensation Has Increased
More than 4 in 10 employees (43%) say that part of their total compensation includes some type of incentive pay: a commission, an ongoing incentive tied to performance, or a bonus. Of those employees receiving incentive pay, 54% say that they expect their incentive compensation to be higher in 2002 than it was in 2001. Another 29% say their incentive pay will be about the same this year as last, and 14% say it will be lower than it was last year.
And Most Employees Expect Raises
Given their increases in 2002, it should not be surprising that many employees are optimistic that their compensation will continue to increase even as the economy struggles. More than half (52%) say they are very or extremely confident that they will get a pay raise from their company during the next 12 months. Another one in five employees (20%) are somewhat confident. Just over one-fourth of employees (27%) say they are not too confident or not at all confident that they will get a pay raise.
Key Points
Given that 2002 has been a difficult year for much of corporate America, it seems like most employees at private sector, for-profit companies have done fairly well in terms of their compensation. This helps explain why the optimism expressed by these employees about the economic outlook for their own companies in 2003 (see "Will Republicans Capitalize on Employee Optimism" in Related Items) is greater than that expressed by consumers and investors about the economy in general. This level of employee optimism is clearly good news for the current economic outlook.
On the other hand, prior to the last couple of years, the U.S. economy had enjoyed nearly a decade of good economic times. During those years, people came to expect that their total compensation would increase every year and that pay raises are routine as opposed to performance-based. In this context, the fact that one in four employees don't expect to get a raise in the year ahead is not a good sign. Nor is it surprising that the recent talk of more layoffs and a weak economy has had a negative impact on consumer/investor confidence.
In a more general sense, the elevated expectations of the past may help explain why so many consumers and investors seem to disagree with economic prognosticators who have been saying that the U.S. economy is doing fairly well. The economists may be right in an absolute sense, but compared to the consumer/investor experience of the past 10 years, economic conditions remain poor. And even those employees who are optimistic about their own companies and their compensation in 2003 may not be similarly inclined about the prospects for the economy as a whole.
*Results are based on telephone interviews with 599 adults who are employed with non-governmental, for-profit companies having five or more employees, aged 18and older, conducted Nov. 11-14, 2002, Nov. 22, 2002, and Nov. 25-26, 2002. For results based on the total sample, one can say with 95% confidence that the maximum margin of sampling error is ±4%. For results based on the sample of 257 employed adults in this sample who receive incentive pay, the maximum margin of sampling error is ±7%. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
