N.O. wage hikes expected to trail national average increase

WORKER SALARIES SHOULD increase next year, a national consulting firm says, but big gains are unlikely to reach the New Orleans metro area.

"Total jobs in our market are down compared with a year ago. In that kind of environment, you generally don't see salaries increasing," says run Ryan, economist

National salaries are expected to increase on average between 3.8% and 4.1% next year, according to the 26th annual U.S. Salary Increase Survey released by Hewitt Associates LLC, a consulting and staffing firm in Delaware.

Analysts based their predictions on a survey of 1,045 companies nationwide.

"In 2002, we saw many companies take action to reduce salary spending, but organizations nationwide seem to be cautiously optimistic about moving forward," says Ken Abosch, a Hewitt analyst. "One of the most encouraging signs of increasing business confidence can be found In the amount companies are planning to budget in 2003 for variable pay."

Increases are more likely in large companies in bigger metropolitan areas, says Joe Micucci, a Hewitt spokesman. Hewitt's report did not offer specific predictions for the New Orleans region.

Ryan works with the Division of Business and Economic Research at UNO to issue the Metropolitan Report, an annual analysis of area economic indicators. The report indicates New Orleans area salaries are expected to rise but its numbers were not as rosy as Hewitt's.

"Inflation is hovering between 2% and 2 1/2%, and salaries are increasing a bit slower than that," Ryan says. "Salaries will likely track inflation though they won't quite match it."

Personal income in the metro area, is expected to increase between 3.7% and 3.9% over the next year. Wages are the cost of labor, where income includes other sources such as stock proceeds, rising home values and government entitlements, Ryan says.

Total employment in Orleans and Jefferson parishes should increase on average less than 0.002% from the fourth quarter this year to the first quarter in 2003, before increasing 0.009% by the end of the year, the report says.

"Our economy is slower than the U.S. economy," Ryan says. "But if you look specifically at the broad measure of income and wages and salaries, the wage and salary component is particularly slow."

Given Hewitt's expectation of national wage increases, small businesses are likely to feel a pinch when trolling the job market.

"Small businesses are generally the ones who are going to have the least ability to give pay increases," Ryan says. "Generally, and this is not the case in every instance, but most small businesses work on smaller margins, and so it is not unusual to see them lag behind with pay."

While lagging salaries are bad news for workers, they are not horrible news for small employers.

"When there's not pressure on salaries, it is generally good for small business because it makes it more profitable," Ryan says. "But keep in mind, general, there is not a big difference between big companies and small businesses in terms of salaries. Markets are competitive, and it depends on what kind of people you are hiring. If you are a tech company, you are going to have to keep up with IBM in order to get the best people so you can stay competitive."

Still, low salary expectations aren't cause for celebration among small business owners.

"Demand is the biggest factor," Ryan says. "Most small businesses would prefer higher demand even if it means they will need to pay slightly higher wages."

The increasing cost of health care is cutting into profit and eating away at raises nationwide, Hewitt analysts say.

Hewitt projects a 15.4% average increase for 2003 on the heels of last year's rate 13.7% hike. Some companies will continue to absorb the majority of next year's increase, but many are increasing employee shares of health care premiums, analysts say.

"Unless there is a fundamental change in the way health care is delivered, costs will double in the next five years," says national health care analyst Jack Bruner.

According to Hewitt, the average employee contribution for 2003 will be 19% for their own coverage and 24% for dependent coverage.

"No matter what die size, industry or location, no organization is safe from major health care increases," Bruner says. "To combat rising costs, many organizations are actively evaluating new alternatives, including higher cost-sharing, spousal surcharges and adding consumer-driven health plans."