Why high achievers are the only ones getting pay raises

An annual pay raise is a thing of the past for many workers.
An annual pay raise is a thing of the past for many workers. –Reuters

If you feel like you haven’t seen a pay raise in recent years, you’re not alone. Despite the nation’s unemployment rate falling significantly since the end of the Great Recession, after-inflation wages have remained flat since 2009, according to the Bureau of Labor Statistics. In many companies, the only people getting raises are the highest achievers, leaving out the majority of employees.

While some economists blame a weak job market that has not accounted for people dropping out of the workforce entirely (as roughly several million have since the start of the recession), others say there’s more to wage stagnation than that.

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As theNew York Times recently pointed out, workforce experts point to factors like the loss of union power and a higher rate of organizations outsourcing and offshoring their work, while plenty of companies are turning to temps, subcontractors, and part-time workers to keep their labor costs down. But perhaps one of the more insidious reasons for flat wage growth is many employers’ shift toward pay-for-performance policies that give hefty bonuses to a lucky few, rather than handing out company-wide pay raises.

Recent data released by management consulting firm Aon Hewitt showed a significant drop in low-skilled workers getting bonuses alongside the white-collar professionals at their companies in recent years. They reported that in 2009, 61 percent of about 1,200 companies surveyed included clerical and technical employees in their bonus pool, while in 2014, that number had dropped to just 43 percent of companies. Meanwhile, over 93 percent of companies doled out bonuses to their white-collar workers.

Aon Hewitt also found that just 10 percent of companies surveyed gave pay raises out across the board.

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Careers most likely to add jobs by 2019:

Why are organizations doing this? The Times suggests that companies hope to cut back on labor costs while attracting and retaining only the most talented workers. They figure the competitive environment will weed out the average employees who feel uncomfortable working in such an intense workplace.

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This trend is great for star performers who went to Ivy League schools like Harvard or MIT and have highly desired skills like software programming or software engineering. But for the majority of employees, it means that by and large, companies are spending less on workers than they have in decades. So little in fact, that The Economic Policy Institute reports that the share of corporate income going to workers has reached its lowest level since 1951.

Some wonder if underpaid workers will take a page out of fast food’s playbook and demand better pay. As thousands of low-wage workers across the country have joined successful campaigns like Fight for $15 for higher minimum wages at companies such as McDonald’s, Walmart, and Target, some labor market experts expect other employees to take note and ask for higher wages as well.

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