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The PayScale Index Shows Real Wages Down Almost 7 Percent Since 2006 While Corporate Profits Reach Highest Level in History

PayScale Offers Guidance to Businesses as New Predictive Analysis Forecasts Only Slight Nominal Wage Growth in Q4, Suggesting Trend of Low Real Wages Will Continue Through End of Year

SEATTLE, WA -- (Marketwired) -- 10/01/13 -- Today, PayScale, Inc. -- the leader in cloud compensation data and software for businesses and individuals -- released the Q3 PayScale Index, the latest quarterly report tracking trends in compensation. The recent survey marks the first time The PayScale Index has revealed shifts in 'real wages' by analyzing statistics from the Consumer Price Index together with PayScale's rich compensation data. The Q3 PayScale Index is also the first predictive Index; projecting only modest national wage growth of 0.1 percent in the U.S. for Q4.

"Real wage growth is a key indicator of economic health and employee satisfaction because it blends inflation together with nominal wages," said Katie Bardaro, lead economist at PayScale. "The results of our Q3 survey aren't encouraging for employees, showing real wages have actually declined over the past seven years. This means the income for a typical full-time worker buys less today than it did in 2006. We also anticipate the trend of negative to low real wage growth will continue in Q4."

The decrease in real wages comes at a time when U.S. corporate profits are at a record high. According to the Q3 gross domestic product (GDP) report from the U.S. Commerce Department, corporate earnings were up 18.6 percent over the past year and corporate profits represented the highest percentage of GDP in history.

"Wages continue to be relatively flat, even as corporate profits are dramatically increasing," said Bardaro. "Our research shows turnover increases and productivity decreases when employees feel undervalued, so we believe this is the time for businesses to reassess their compensation strategy to ensure long-term success."

In addition, PayScale research found that 59 percent of businesses felt retention was a 'main concern' as the economy rebounds, up from 28 percent in 2009. In this climate, companies should have a more balanced approach to compensation to attract and retain the right talent. PayScale recommends businesses take the following three steps:

  • Understand the real costs of under-compensating - While keeping salaries low may seem like a good approach in the short term, it can result in lost productivity from existing employees and the loss of top performers who are expensive to replace.
  • Take a measured approach to adjusting compensation - Businesses shouldn't rush to increase compensation across the board, but should instead evaluate key positions or geographic locations where the competition for talent is especially hot.
  • Remember: the economy is volatile - In our current business climate, industries and skill sets which are hot today, may be cool tomorrow. Companies should make compensation decisions based on up-to-the minute data reflecting the exact attributes of their positions or the specific professional experiences of their employees.

Key findings from The Q3 PayScale Index:

  • Nominal wages have not kept pace with inflation; real wages have dropped almost 7 percent since 2006, meaning the buying power of the average U.S. worker is lower than it was seven years ago.
  • The prediction for Q4 is only a very slight increase to nominal wages of 0.1 percent, resulting in annual wage growth of just 0.8 percent.
  • Changes in nominal wage growth for Q3 were a mixed bag, as wage growth was not seen across the board.
  • Previous high-performing industries recovered from their Q2 decline and are back on top this quarter: oil and gas exploration, biotech, and healthcare.
  • Media and publishing jobs hold the top spot for annual nominal wage growth at 3.9 percent.
  • San Francisco, Baltimore, and Seattle are the U.S. metro areas that experienced the highest year-over-year growth with more than 2.5 percent.

The Q3 PayScale Index also analyzed wage trends in the United Kingdom and Canada. Wages in the U.K. increased 9.3 percent since 2006, compared to 8.2 percent in the U.S. for the same period. The results show U.K. wage recovery has been more rapid than recovery in the U.S.

To view the entire interactive Q3 PayScale Index which reflects wage trends across various industries, company sizes and major metros, please visit: http://www.payscale.com/payscale-index.

About The PayScale Index:

The PayScale Index follows changes in total cash compensation for full-time, private industry employees in the U.S., Canada, and the U.K. Three new features were added to the regularly released PayScale Index including:

  • A forecast of the National U.S. PayScale Index for Q4 2013
  • A PayScale Real Wage Index, which tracks changes in wages adjusted for inflation since 2006
  • A national PayScale Index for the U.K.

For more information on the PayScale Index, please visit the methodology and FAQ pages.

About PayScale:

Creator of the largest database of individual compensation profiles in the world containing 40 million salary profiles, PayScale, Inc. provides an immediate and precise snapshot of current market salaries to employees and employers through its online tools and software. PayScale's products are powered by innovative algorithms that dynamically acquire, analyze and aggregate compensation information for millions of individuals in real time. Publisher of the quarterly PayScale Index™, PayScale's subscription software products for employers include PayScale MarketRate™, PayScale Insight™, and PayScale Insight Expert™. PayScale's cloud compensation software is used by more than 2,500 customers including Mozilla, Tully's Coffee, Clemson University, and the United States Postal Service. For more information, please visit: www.payscale.com or follow PayScale on Twitter: http://twitter.com/payscale.

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