A survey has indicated that U.S. employers have budgeted pay raises averaging 3.3 percent to 3.5 percent for this year and next. This is well below the routine increases seen before the economy faltered. As compensation specialist Charles Peck points out, pay raises are all relative to inflation and controlling for inflation, employees will see real gains of less than 1 percent this year and next. There are several explanations for the smaller raises including the rising costs of employee health care and pensions and an oversupply of workers.
See "Pay raises getting smaller", Chicago Tribune, July 29, 2003