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Pay increase trends for 2003 won't raise anyone's spirits

By ROBERT TRIGAUX, Times Business Columnist

© St. Petersburg Times, published December 15, 2002

When the Tampa Bay area was the magnet for new call centers a few years ago, competition for workers grew so intense that the typical wage for an entry-level employee ballooned 32.2 percent. In one year.

"One call center would open and offer a dollar more per hour, then the next one would open and say 'We'll see your dollar and raise ya a dollar more,' " recalls Florida compensation consultant Barry Brown, who tracks pay trends. "It was a great poker game of employment."

No more. The Tampa Bay area's call center fever broke long ago. Now the depressed economy and its persistent threat of layoffs have stifled employee dreams of big pay raises and hefty year-end bonuses throughout the area's workforce.

Pay increases for 2003 at Tampa Bay area companies should average 3.9 percent, says Brown, whose Effective Resources firm in Holiday has surveyed area companies each year since 1992. Statewide, pay increases will be closer to 4.1 percent.

For those workers who feel like they are working harder while going backwards, such pay hikes seem paltry, even demoralizing.

Why? Because what lean pay raises giveth, premiums for faster-rising health insurance and other benefits taketh away. More on that in a moment.

Here's a snapshot from Brown's latest survey of 133 area companies of what employees should expect in 2003 pay raises:

-- Tampa Bay's battered hospitality industry plans on an average 3.2 percent pay increase, down sharply from the 4.2 percent raise offered this year. Statewide, hospitality pay increases will be closer to 3.9 percent.

"Compared to the rest of the state, Tampa Bay's hospitality business was pretty hard hit after 9/11," Brown says.

-- Tampa Bay area workers at manufacturing and distribution companies should get an average 3.5 percent pay bump, down from 3.9 percent this year. Government and education workers will see a slight improvement in pay increases: 3.6 percent, up from 3.4 percent. Banking and finance workers will enjoy an average 4.1 percent increase, up from 3.9 percent.

-- Small area businesses -- those with 50 or fewer employees -- are suffering more than others. Their employees will see an average 3.3 percent pay increase, while small-business workers statewide will receive closer to 4.2 percent.

* * *

With the national unemployment rate last month jumping unexpectedly to 6 percent, the highest in nearly nine years, most employers see little need to be generous raise-givers. And when inflation of about 2 percent is subtracted from a raise of 3 to 4 percent, that leaves only a sliver of a real wage hike for most workers.

Still, it could be worse. Nationwide some companies, including struggling airlines and high-tech companies, are cutting pay by as much as 15 percent. Other businesses are freezing wages.

Of 130 large U.S. companies surveyed, more than half are holding pay increases to 3.5 percent in 2003, the third straight year of modest raises, Deloitte & Touche says.

Ditto for most bonuses. Twenty percent of businesses polled by Deloitte & Touche are eliminating bonuses for 2002 for the second consecutive year. Another 25 percent are giving bonuses that are half the value (or less) of what employees received in better economic times.

Of course, everybody does not receive the same pay raise. Employers indicate their top employees will receive average pay increases next year of 5.2 percent. Average performers will get 3.5 percent. And the weaker workers will pull in 1.2 percent raises, Mercer Human Resource Consulting says.

Both Brown and Mercer see signs that some employers are lowering their 2003 pay increases to offset their higher health care and pension plan costs. Mercer found that 17 percent of companies reduced, or are considering reducing, salary increases to defray higher expenses from health care benefits.

Other companies choose to give higher raises but are requiring workers to pay a greater share of their health care costs.

Combining employer and employee contributions, health benefit costs per employee rose 14.7 percent in 2002 and are likely to increase by a similar amount in 2003.

Brown's poll reveals another ominous trend. Smaller employers, those with 50 or fewer workers, are confronted with such severe annual jumps in health care costs -- 20 percent or more -- that they are choosing to drop benefit packages altogether.

"Some small businesses prefer to give employees a decent raise and tell them to go out and find their own health benefits," Brown says. "I had never heard of that until the past year or two."

The average employee costs his employer $5,646 this year in health costs. That's up 56 percent from $3,594 only five years ago.

Mercer found the percentage of businesses with 10 to 49 employees offering a health plan fell from 66 percent to 62 percent in just one year.

To Brown, the declining number of small businesses that offer benefits is a call to arms.

"So many employees are working without benefits, and so many employers say they cannot afford to offer them," he says. "That is the biggest challenge for our country today."

He's got that right.

-- Robert Trigaux can be reached at or (727) 893-8405.

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