Each quarter, ERI examines the rates at which compensation has increased and provides guidance on expected increases for the upcoming year. These rates are calculated using ERI’s Salary Assessor and ERI’s Salary Increase Survey & Forecast. In the context of this paper, results represent actual growth reported in ERI’s Salary Assessor over periods ranging from one quarter to twenty years.
Actual compensation movement in the first quarter of 2024 (published April 1, 2024) saw a lower level of growth at 0.79%, below January’s growth of 1.09% and October’s 0.94%. The past 4 quarters have seen higher-than-average growth, with 4.1% growth since the January 2023 data release. This rate of growth is largely unchanged from the year-over-year (YOY) rate of growth reported last quarter at 4.12%.
Current labor market data indicate a softer market than the first half of 2023, but one that has been largely unchanged since last quarter. An examination of the current number of job openings indicates a high number of open jobs in the United States, with an open job rate of 5.3%, which is higher than the 10-year average open job rate of 4.7%. However, it is down from the high of 7.3% in March 2022. The hires rate is currently 3.6%, which has been relatively consistent since July 2023. This gives us a current gap between open jobs and hires of 1.7%. This gap hit its highest point in March of 2022 at 2.9%, and the 15-year average gap is 0.27%. So, the gap between hires and open jobs remains high, but it is narrowing. The chart below shows the historical difference between the rate of open jobs in the economy versus the rate at which employees are hired. A gap between the number of open jobs and the number of employees who are hired indicates that organizations are not able to hire all the employees that they would like. This can lead to organizations needing to raise compensation rates to hire the employees they need.
Figure 1. Hires vs. Open Jobs
Considering the quits rate, employees are currently quitting at a rate of 2.1%, which is down from its high of 2.9% in April 2022 and below the 10-year average of 2.25%. The gap between the hires and open jobs rate, along with fewer people quitting, asserts an upward pressure on compensation, though not as strongly as previous quarters. However, the unemployment rate increased to 3.9%, which is up from July 2022’s low of 3.5%, but still generally considered full employment. The prime-age population ratio (EPOP) remains at 80.7%, which is consistent with last quarter’s rate. Additionally, the 30-year average EPOP is 78.6%, which is below the current participation rate and above the rate immediately prior to the start of the recent pandemic (80.5%). The current EPOP is below the all-time high, which was 81.9% in April 2000.
Of course, the labor market is not the full story. At the time of writing, the inflation rate stands at 3.2%, which is down 6% since the high in June of 2022. These rates continue the trend of moderating inflation and may have a tempering effect on compensation increases. Inflation can influence the growth of compensation, and the extent of that influence also varies depending on the level of inflation, with high inflation related to higher levels of compensation growth. Inflation is above the target rate of 2%, so we may continue to see higher levels of compensation growth. If inflation continues decreasing over the next year we may see a reduction in the current pressure on compensation.
Other economic indicators can point towards the health of the economy and may serve as leading indicators for compensation growth, which tends to lag economic changes. Overall, these indicators paint different pictures of the economy, with some increasing and others decreasing. Specifically, GDP increased at a rate of 3.2%, which is down from 5.2% in Q3 2023 and up from Q2 2023 (2.1%), Q1 2023 (1.7%), and Q4 2022 (1.2%), which supports the idea of economic growth. The Bureau of Labor Statistics (BLS) reports that real hourly wages (which account for inflation) have decreased by 0.36% from January to February and increased by 1.09% over the past year. Industrial production decreased by 0.2% in February 2024 and increased by 0.88% over the past year, while wholesale sales increased by 4.96% YOY as of January 2024.
In summary, the labor market has remained consistent over the past quarter except for the quits rate, which has decreased. This may indicate that employees are less likely to voluntarily leave jobs than in previous years. There is still a gap between the hires and open jobs rate, which indicates that employers are still looking for employees. This points toward higher compensation growth, but the reduction in quits may mean that organizations will need to reduce hiring in the future as turnover becomes less of a concern. This may indicate that the time of high compensation growth is cooling. ERI expects higher-than-average compensation growth continuing through 2024, with the absolute rate of growth continuing to slow throughout the year. ERI will continue monitoring and reporting on these trends as they unfold over the next several quarters.
Overall Compensation Trends
April salaries have increased by 0.79% (see Table 1) over the January 1 data release. This rate of growth is slightly higher than the predicted quarterly rate of 0.73%. Growth over the past year has been 4.10%, with an average quarterly growth of 1.03%. To put this into context, the average quarterly growth over the past 20 years has been 0.68% (see Table 2). Over the same 20-year period, the average April increase has been 0.67%. Over the past 20 years, April increases (first quarter) have been consistent with increases throughout the rest of the year, and the current quarter is lower than that trend. The annual growth rate appears to have decreased from 4.12% to 4.10%, with previous quarters growth rates of 1.09% (January 2024), 0.94% (October 2023), and 1.17% (July 2023).
Overall Trends by Year
Please refer to Figure 2 below, which has three lines. Two lines (dark green and light green) represent projected salary increases from ERI’s Salary Increase Survey & Forecast, and the black line represents actual changes in salary reported in ERI’s Salary Assessor. The dark green and light green lines represent what survey respondents expected to happen each year (collected in the previous year), and the black line represents what actually happened in a given year. By comparing these three lines, we can see the extent to which expectations met up with reality. As noted earlier, the actual movement (black line) is expected to follow the structure increase (dark green line). This is because salary surveys generally capture the movement of salary structures within organizations instead of measuring the salary increase of individual employees.
An examination of where the reality of salary movement (black line) has departed from the expected trend line (dark green line) gives us information regarding how salaries might move in the future. Specifically, the past 2013 and 2014 saw actual salaries grow at a rate that is higher than expectations from the previous year. The years 2015 through 2020 were more in line with expected growth (dark green), and growth since 2020 has been higher than predicted.
Projected Movement vs. Actual Salary Movement
Figure 2. Overall Trends. 2024 Budget Increase of 3.94% (Light Green Line), 2024 Structure Increase of 2.92% (Dark Green Line), 2024 Actual Growth of 4.10% (Black Line).
Note: Each year represents the end of a given year (e.g., 2024 references December 31, 2024). This is calculated by extending the Q1 growth rates to the end of 2024. Actual rates for 2024 will update as the year progresses.
Source: ERI’s Salary Increase Survey & Forecast and ERI’s Salary Assessor.
10-Year Trend by Category
While it is valuable to know how all occupations are moving in this economy, it is also useful to know how different types of occupations move relative to each other and across time. Not all occupations grow at the same rate, and not all occupations grow at the same rate across time. Figure 3 reveals the total growth experienced across a 10-year period. If we break all occupations down into ten categories, then it becomes clear that some occupations are growing at a faster rate than others. Specifically, Sales employees appear to have seen the highest level of growth, whereas Top Management occupations have seen the slowest growth.
Figure 3. Total Salary Growth by Occupational Category 2014-2024.
Source: ERI’s Salary Assessor
Mean Salary by Category
Table 3 reveals the actual growth rates for different occupational categories in the past three years and provides information on whether the occupational category is seeing increased or decreased growth. It is important to note that, just because an occupational category has decelerating growth, it does not mean that the trend will continue. All occupations may be expected to see salary growth over time, so an occupational category that has been showing slow growth may be more likely to see higher growth in the future.
Occupational Categories
In the process of examining the growth of compensation data on a national basis, the data were broken into ten specific occupational categories to study changes in compensation at a more granular level. The populations of these categories are illustrated in Figure 4 below.
Percentage of Occupations by Category
Figure 4. Each category’s percentage as it relates to the total number of occupations.
About the National Compensation Forecast
The National Compensation Forecast is designed to capture salary changes across a broad range of jobs found in the United States economy. This index shows how national compensation has changed over the 20 years prior to the time of publication: April 2024. Of note, these figures represent actual and projected salary growth for base compensation only. Other sources include data on the cost of benefits, incentives, and base compensation. By simplifying the analysis and focusing only on the fundamental component of compensation (base compensation), ERI hopes to provide a cleaner picture of how compensation is growing in the United States. The data contained in this report are derived from quarterly results published in ERI’s Salary Assessor, a professional compensation tool used widely across the public and private sector, including most Fortune 500 organizations. For a full discussion of the product’s methodology, please see the Salary Assessor methodology. The specific data used in this report represent 2,052 distinct occupations, which were consistently surveyed across the 20 years covered by this report. These occupations range from the lowest-paid occupation that ERI surveys (Dishwasher) to the highest-paid occupation (CEO) and represent mean base salary. Data are first examined on an aggregate basis before being broken down into 10 occupational categories. The data for the 2024 index comes from data submitted to ERI’s Salary Increase Survey & Forecast.
In coming quarters, ERI will continue to track and report on the trends that exist in the compensation landscape.
Please direct any questions or comments to Jonas Johnson, Ph.D.: [email protected].
By Jonas P. Johnson, Ph.D. and Calvin A. Brooks