Pay forecast: Tough climate for raises

Don't plan on a big wage hike next year.

While layoffs have justifiably garnered bigger headlines, salary pressures are a parallel workplace trend in today's go-slow economy.

• Some companies - from ailing airlines to high-tech firms - have had to cut pay by as much as 15 percent.

• Other employers are freezing salaries, leaving workers adrift against inflation.

• Many are making employees pay more of the cost of benefits such as healthcare.

While salaries are still rising on average, these trends are eating into the spending power of many American households at a time when the economy seems stuck in low gear.

With unemployment in November jumping from 5.7 percent in October to 6 percent last month, the highest in nearly nine years, most employers do not need to be generous.

"There isn't the pressure to chase people with more dollars in their paychecks," says Steven Gross, a compensation expert in Philadelphia with Mercer Human Resources Consulting.

The tougher paycheck climate comes at a time when other factors, from the stock market to a possible war in Iraq, have kept consumers on edge.

In a new Christian Science Monitor/TIPP poll, an index of Americans' economic optimism fell a point, to 53.3 from 54.4 in November.

The same poll found that, even though official numbers show personal income rising in the past 12 months, many people say they are earning less.

While 46 percent said their salary had not changed, 27 percent said salary changes had left their households with less money to spend. Only 22 percent said salaries had changed for the better.

At the same time, nonsalary compensation is squeezed. The poll found that, by a 4-1 margin, changes in bonuses, stock options, and the like have been for the worse, not better, in the past year.

Such results sometimes reflect a mixture of perception and reality. But recent trends are clearly much different from the late 1990s, when salaries rose steadily in most industries.

Conductus Inc., a Sunnyvale, Calif., high-tech firm, slashed pay for its 60-plus employees by 15 percent in October.

Similar cuts have rippled through pockets of the service sector.

Airlines, facing a sharp slump in revenues, have been especially hard hit. Most United Airlines workers agreed to pay cuts, which could total more than $5 billion as the airline enters bankruptcy proceedings. At Hawaii's Aloha Airlines, four unions representing some 3,000 employees agreed to pay cuts of about 10 percent last month.

But even at firms that are in better shape, pay-raise prospects are not rosy.

Mercer, the consulting firm, surveyed 400 employers this fall and found that almost one-third were planning slightly smaller pay raises next year - 3.4 percent on average for nonunion hourly workers - than they had budgeted last spring.

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