If unemployment remains low, pressure to boost pay for workers could lead to a shrinking of the pay gap between a company's lowest and highest income earners. In August, average weekly earnings of all employees in the private sector totaled $868.11, a far cry south of the nine-figure salaries paid to many CEOs of publicly traded companies. In 2014, the average CEO of an S&P 500 company made 373 times more than the average production and non-supervisory worker.
Low unemployment could also lead companies to embrace more non-traditional ways to keep employees happy.
Sandra McLellan, North America practice leader of rewards, at Towers Watson, had this to say:
Net worth is climbing
The pick-up in pay could help strengthen workers' personal balance sheets, which are already benefiting from a multi-year run in home prices and the stock market.
According to the Federal Reserve, American household collective net worth has grown to $84.9 trillion from less than $55 trillion in 2009. A lot of that increase is tied to median home prices, which have increased from $165,000 in Q1, 2009 to $234,000 in July and a 165% increase in the S&P 500 during roughly the same period of time.
Because homeowners and stock market investors have been the biggest beneficiaries of rising net worth, people wanting to make the most of their pay raise may want to consider putting all, or at least some, of it to work, rather than spending it. Banks are finally easing lending requirements for home purchases and retirement plans, such as 401(k) plans, provide investors with a simple way to sock more away in stocks for retirement.
Looking ahead
The actual amount that companies pay out in the form of raises next year may differ from the survey, particularly if higher interest rates lead to slowing economic growth that dents corporate profit. Also, buying power associated with raises could slip if inflation, which is a relatively tame 1.7%, increases. Despite those risks, the biggest influence on pay next year is likely to remain the unemployment rate. If it stays at these levels or falls further, employers will be forced to up the ante to retain their best workers, and that's worth cheering about.
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The article This Survey Says You're Going to Make More Money Next Year originally appeared on Fool.com.
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