Analysis of Salary growth Over Time: 1998-2012 - ERI Economic ...
Analysis of Salary Growth Over Time: 1998-2012 By Jonas Johnson, Ph.D. Senior Researcher
ANALYSIS METHODOLOGY
ANNUAL SALARY GROWTH BY PERCENTAGE
This analysis examines how salaries have grown over the past 15 years using the underlying data from ERI’s Salary Assessor. To examine this growth, an historical database of national mean salary figures was compiled. Data were taken from the January 1 release of each Assessor dataset to determine the year-to-year salary growth change.
There are a number of interesting changes to the salary growth of occupations as seen in Figure 1. One striking observation is the amount of fluctuation in salary growth over the past 15 years. Furthermore, the fluctuations do appear to follow certain trends. Specifically, there are periods of increased salary growth and periods of depressed salary growth among most occupations. Both periods of decline, in the early 2000s and, again, starting in 2008, coincide with economic recessions in the United States. During the last two recessions, the reduction of salary growth bottomed in 2004. This is followed by a rebound of salary growth until 2008, when a more consistent reduction of salary increases across occupations aligns with the 2008 recession.
Data used in the analysis cover 1,462 occupations whose salaries were consistently tracked from 1998 to 2012. To greater simplify and clarify the relationships between these occupations, the occupations were examined from the perspective of nine categories: Clerical, Field & Shop, Technical, Sales, Professional, Health Care, Supervisory, Middle Management, and Top Management. These data were analyzed in three ways: first, by examining annual percentage of salary growth from 1998 to 2012; second, by the average annual salary; and finally, the average annual increase was compared with the annual dollar increase.
Figure 1.
The difference between the decrease after the recession of the early 2000s and the decrease after the 2008 recession do appear to be noteworthy. While there is more variance in the decrease of salary growth following the early 2000s recession, the 2008
Annual Wage Growth By Occupation Type 1998-2012
10.00%
8.00%
Percentage Growth
6.00%
Clerical Field & Shop Technical
4.00%
Sales Professional
2.00%
Health Care Supervisory
0.00%
Middle Mgt Top Mgt
-2.00%
-4.00% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year
Copyright© 2013 ERI Economic Research Institute | 8575 164th Ave NE, Suite 100, Redmond, WA 98052 (800) 627-3697 | [email protected] | www.erieri.com
1
Salary Growth recession corresponds with a sharp and consistent decrease of salary growth. The difference in the two periods of salary growth decline may be due to a broader recession in 2008, which impacted most sectors of the economy and, thereby, most employees. This is opposed to the previous recession, which appears to have had a greater impact on Technical, Professional, and Sales jobs, all of which posted negative salary growth in 2004. Additionally, individuals in Clerical and Health Care occupations were not impacted as significantly as those in other occupations, showing relatively steady growth throughout the early 2000s. Excluding factors not covered in this analysis, salary growth data trends over the past 15 years suggest that the 2008 recession may have had a more consistent effect on increases across all occupations, whereas the less severe recession of the early 2000s showed varied impact on select occupations. ANNUAL SALARY GROWTH BY DOLLAR AMOUNT In examining the growth of salaries in terms of real dollars, one striking trend becomes clear. Specifically, the rate of salary increase for Top Management appears to be increasing at a higher rate than the salaries for other workers (see Figure 2). However, the percent increase in salaries for Top Management does not appear to be drastically out of range with other occupations. Top Management salaries seem to be increasing at a higher rate than other occupations because the starting salaries are already greater than other occupations. Similar percentages applied to a higher number will result in a larger rate of growth for Top Management in terms of real dollars.
Figure 2.
This difference in growth rates may be the result of how compensation professionals structure increases. Because salary increases are generally calculated as percentages, the slope of salary increase will be greater for the Top Management group because they are starting with higher pay. This relationship may be seen in Table 1. The table shows the average annual growth rates in terms of percentages and dollars. While the percent increase for Top Management is higher than other job categories, it is still in the same range as the other percentages. The real dollar increase, however, is substantially higher for the Top Management group than other employees. Table 1.
Average Annual Salary Growth 1998-2012
Occupation Type
% Growth
Annual Increase
Clerical
3.08%
$
891.21
Field & Shop
2.45%
$
774.03
Technical
2.51%
$ 1,066.86
Sales
2.09%
$ 1,076.47
Professional
2.62%
$ 1,537.30
Healthcare
2.48%
$ 1,450.13
Supervisory
2.89%
$ 1,393.67
Middle Mgt
2.87%
$ 1,850.29
Top Mgt
3.20%
$ 3,956.68
Annual Base Salary by Occupation Type 1998-2012
180000 160000
Annual Base Salary
140000 Clerical
120000
Field & Shop Technical
100000
Sales 80000
Professional Health Care
60000
Supervisory Middle Mgt
40000
Top Mgt
20000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year
2 Copyright© 2013 ERI Economic Research Institute
Salary Growth
CONCLUSION These results indicate two interesting findings. First, the data show that occupations appear to follow similar large scale trends in salary growth over time. If the growth of salaries between occupations were completely independent, we would expect to see that seemingly unrelated groups such as Field & Shop and Health Care would not follow similar patterns. However, because these trends do tend to increase and decrease during similar periods, this study may show evidence for the performance of the economy influencing salary growth. However, it appears that this relationship may change depending on the type of economic conditions. Specifically, the greater amount of variance in growth following the early 2000s recession may show that, while occupations generally follow the same pattern of growth, the amount of growth is still influenced by other factors not addressed in the current study.
Second, the results of section two point out a possible reason for the accelerated rate of growth in executive compensation. The increased rate of growth may be the result of salary increases being calculated as percentages as opposed to raw dollar amounts. This finding may explain the mechanism behind why Top Management salaries are increasing at a higher rate than other occupations. The current paper is not a judgment on whether increased rate of Top Management compensation is good or bad. Rather, it is an attempt to understand why that relationship exists. Taken together, these results suggest two mechanisms that may impact salary growth among occupations found in the U.S. These mechanisms, one external and one procedural, may be fundamental forces that underlie the growth of salaries. By further studying these relationships, we may be able to better manage compensation within organizations.
3 Copyright© 2013 ERI Economic Research Institute
ANALYSIS METHODOLOGY
ANNUAL SALARY GROWTH BY PERCENTAGE
This analysis examines how salaries have grown over the past 15 years using the underlying data from ERI’s Salary Assessor. To examine this growth, an historical database of national mean salary figures was compiled. Data were taken from the January 1 release of each Assessor dataset to determine the year-to-year salary growth change.
There are a number of interesting changes to the salary growth of occupations as seen in Figure 1. One striking observation is the amount of fluctuation in salary growth over the past 15 years. Furthermore, the fluctuations do appear to follow certain trends. Specifically, there are periods of increased salary growth and periods of depressed salary growth among most occupations. Both periods of decline, in the early 2000s and, again, starting in 2008, coincide with economic recessions in the United States. During the last two recessions, the reduction of salary growth bottomed in 2004. This is followed by a rebound of salary growth until 2008, when a more consistent reduction of salary increases across occupations aligns with the 2008 recession.
Data used in the analysis cover 1,462 occupations whose salaries were consistently tracked from 1998 to 2012. To greater simplify and clarify the relationships between these occupations, the occupations were examined from the perspective of nine categories: Clerical, Field & Shop, Technical, Sales, Professional, Health Care, Supervisory, Middle Management, and Top Management. These data were analyzed in three ways: first, by examining annual percentage of salary growth from 1998 to 2012; second, by the average annual salary; and finally, the average annual increase was compared with the annual dollar increase.
Figure 1.
The difference between the decrease after the recession of the early 2000s and the decrease after the 2008 recession do appear to be noteworthy. While there is more variance in the decrease of salary growth following the early 2000s recession, the 2008
Annual Wage Growth By Occupation Type 1998-2012
10.00%
8.00%
Percentage Growth
6.00%
Clerical Field & Shop Technical
4.00%
Sales Professional
2.00%
Health Care Supervisory
0.00%
Middle Mgt Top Mgt
-2.00%
-4.00% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year
Copyright© 2013 ERI Economic Research Institute | 8575 164th Ave NE, Suite 100, Redmond, WA 98052 (800) 627-3697 | [email protected] | www.erieri.com
1
Salary Growth recession corresponds with a sharp and consistent decrease of salary growth. The difference in the two periods of salary growth decline may be due to a broader recession in 2008, which impacted most sectors of the economy and, thereby, most employees. This is opposed to the previous recession, which appears to have had a greater impact on Technical, Professional, and Sales jobs, all of which posted negative salary growth in 2004. Additionally, individuals in Clerical and Health Care occupations were not impacted as significantly as those in other occupations, showing relatively steady growth throughout the early 2000s. Excluding factors not covered in this analysis, salary growth data trends over the past 15 years suggest that the 2008 recession may have had a more consistent effect on increases across all occupations, whereas the less severe recession of the early 2000s showed varied impact on select occupations. ANNUAL SALARY GROWTH BY DOLLAR AMOUNT In examining the growth of salaries in terms of real dollars, one striking trend becomes clear. Specifically, the rate of salary increase for Top Management appears to be increasing at a higher rate than the salaries for other workers (see Figure 2). However, the percent increase in salaries for Top Management does not appear to be drastically out of range with other occupations. Top Management salaries seem to be increasing at a higher rate than other occupations because the starting salaries are already greater than other occupations. Similar percentages applied to a higher number will result in a larger rate of growth for Top Management in terms of real dollars.
Figure 2.
This difference in growth rates may be the result of how compensation professionals structure increases. Because salary increases are generally calculated as percentages, the slope of salary increase will be greater for the Top Management group because they are starting with higher pay. This relationship may be seen in Table 1. The table shows the average annual growth rates in terms of percentages and dollars. While the percent increase for Top Management is higher than other job categories, it is still in the same range as the other percentages. The real dollar increase, however, is substantially higher for the Top Management group than other employees. Table 1.
Average Annual Salary Growth 1998-2012
Occupation Type
% Growth
Annual Increase
Clerical
3.08%
$
891.21
Field & Shop
2.45%
$
774.03
Technical
2.51%
$ 1,066.86
Sales
2.09%
$ 1,076.47
Professional
2.62%
$ 1,537.30
Healthcare
2.48%
$ 1,450.13
Supervisory
2.89%
$ 1,393.67
Middle Mgt
2.87%
$ 1,850.29
Top Mgt
3.20%
$ 3,956.68
Annual Base Salary by Occupation Type 1998-2012
180000 160000
Annual Base Salary
140000 Clerical
120000
Field & Shop Technical
100000
Sales 80000
Professional Health Care
60000
Supervisory Middle Mgt
40000
Top Mgt
20000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year
2 Copyright© 2013 ERI Economic Research Institute
Salary Growth
CONCLUSION These results indicate two interesting findings. First, the data show that occupations appear to follow similar large scale trends in salary growth over time. If the growth of salaries between occupations were completely independent, we would expect to see that seemingly unrelated groups such as Field & Shop and Health Care would not follow similar patterns. However, because these trends do tend to increase and decrease during similar periods, this study may show evidence for the performance of the economy influencing salary growth. However, it appears that this relationship may change depending on the type of economic conditions. Specifically, the greater amount of variance in growth following the early 2000s recession may show that, while occupations generally follow the same pattern of growth, the amount of growth is still influenced by other factors not addressed in the current study.
Second, the results of section two point out a possible reason for the accelerated rate of growth in executive compensation. The increased rate of growth may be the result of salary increases being calculated as percentages as opposed to raw dollar amounts. This finding may explain the mechanism behind why Top Management salaries are increasing at a higher rate than other occupations. The current paper is not a judgment on whether increased rate of Top Management compensation is good or bad. Rather, it is an attempt to understand why that relationship exists. Taken together, these results suggest two mechanisms that may impact salary growth among occupations found in the U.S. These mechanisms, one external and one procedural, may be fundamental forces that underlie the growth of salaries. By further studying these relationships, we may be able to better manage compensation within organizations.
3 Copyright© 2013 ERI Economic Research Institute
