Salary hikes by US firms in 2010 at 25-year lows

The 2010 budgets of US companies for salary increases barely exceed inflation, meaning pay for US workers may only just keep up with cost of living increases, according to a business research group.

The Conference Board said firms are budgeting for 2010 salary increases of below three per cent, the lowest level in the survey's 25-year history.

"US workers will continue to face downward pressure on their salaries and wages," said Linda Barrington, Managing Director at The Conference Board and co-author of the report.

"For the economy this is a concern because salaries translate into consumer spending," said Barrington. "We try to get people to spend more, but businesses are reluctant to pay them more. That's the Catch 22 of the recovery."

The median forecast of budgets for 2010 salary increases now stands at 2.8 per cent for all employee groups except executives. Meanwhile, the 2010 inflation rate should be 2.6 per cent, said the Conference Board.

Salary experts typically make sure salary structures move "in lock step with inflation", said John Gibbons, Programme Director at The Conference Board. Projected salary gains of near zero per cent after inflation mean employers assume there is sufficient supply of labour to keep demands for salary increases subdued, regardless of cost-of-living increases, he said.

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