Wage increases in California will climb to a 4 year high in 2006

Although wage increases were marginal this year, Californiaís salary outlook is surprisingly good for 2006, according to an annual survey conducted this month by the Employers Group, a human resources management association for California employers.

For the first time in four years, projected salary increases are predicted to be higher than the previous year. The projected average merit increase will move from 3.69 in 2005 to 3.83 in 2006. These figures include hourly, exempt, and non-executive managers. Total increases, defined as merit plus general increases and other forms of pay (bonuses, etc.) will be as follows: Hourly non-clerical 3.8; Hourly Clerical 3.99; Exempt 4.15; Executives 4.6.

ìThese figures strongly suggest that Californiaís economic recovery has started to spread to employees in the form of higher salaries,î said Bill Dahlman, President and CEO of Employers Group.

According to survey data collected from 260 California companies, 2005 is the second consecutive year that pay increases have risen from the previous year. The average merit pay increase rose from 3.93 percent in 2004, to 3.98 percent for executives, managers, exempt and hourly employees. Wage freezes have also consequently remained below the double digits. With a record high of 11% in 2003, this year 6 percent of companies reported company-wide wage freezes ñ slightly higher than last yearís 5 percent.

Of the major areas covered by the survey, the highest increases reported came from companies in Metro Los Angeles with projected total increases ranging from 3.86 percent for hourly non-clerical employees, to 4.48 percent for executives. Also non-manufacturing firms, including service, finance and retail/wholesale also reported higher salary budgets for 2006 than firms in the manufacturing sector.

However, compared to last yearís employment projections, more companies in the San Francisco Bay area reported stronger employment gains for the next 12 months: Almost twice as many firms indicated ìModerateî employment increase levels of exempt personnel than in 2004. Strong employment activity is also forecasted for hourly production employees. For Metro Los Angeles, forecasted employment levels seem in paced with last yearís figures. In San Diego, higher employment levels for hourly, clerical and production, is forecasted.

ìSince 2001, annual increases have dropped from 4.72 to 3.64 percent. Barring any major economic changes, 2006 will mark the first year where salary increases are likely to climb,î said Juan Garcia, Employers Groupís Director of Research Services.

Finally, another possible sign of a tighter labor market for 2006 is the number of separations experienced by employers in 2005. The survey found that compared to 2004, the median number of separations experienced by firms in California over the last 12 months increased from 12 to 15 percent. Although higher turnover rates arenít great news for employers, these figures surprisingly indicate a healthy job marketóone where employees are rapidly moving from one job opportunity to the next.

Distributed by HR Marketer.com