In many ways 2017 has been a reasonably stable year for the Washington, D.C., area’s business community. The surging job growth of 2016 hasn’t let up. The prospect of a jump in defense spending has sparked a stock market rally for government services firms, many of which are based here. And the region has had incremental success persuading large corporations to relocate here, with Nestlé and Yelp opening major offices.
But all that business success has yet to translate into big salary increases for the average worker in the region.
Payroll data collected by the research group Akron and the D.C. chapter of the Society for Human Resource Management found that local companies increased average salary budgets by about 3 percent between 2016 and 2017. Companies say they expect to do the same next year.
That’s about the same increase that companies offered in the years immediately after the recession. Raises tend to be much smaller than they were before the 2009, when average salary budgets in the area went up by about 4 percent every year.
The slow pace of payroll growth has continued to puzzle economists, who say plunging unemployment rates, surging stocks, a shrinking labor force and stable federal spending should be prompting employers to allocate more to payroll.
“Every construction firm owner you talk to says, ‘We can’t find pipe fitters, we can’t find welders,'” said Anirban Basu, an economist with Sage Policy Group. “Everybody is screaming about worker shortages but when you look at the data, wages aren’t really accelerating.”
So why haven’t salaries risen faster?
Akron survey administrator Angelo Kostopoulos describes a corporate environment where companies are “still trying to do more with less.” The memory of the last economic downturn is still fresh in the minds of many managers, and it’s leading them to be cautious about how they handle raises and bonuses.
“I wouldn’t be surprised if it stayed like this for several years to come,” Kostopoulos said.
Some say low inflation also gives managers leeway to keep salary increases small. The inflation rate for the United States was about 1.7 percent for the one-year period that ended in July, less than the average payroll increase.
But even with inflation in check, the cost of living in the Washington area has increased significantly for some.
Rents have skyrocketed, making it hard for newer residents to settle in for the long term, and housing costs have priced some D.C. natives out of once-affordable neighborhoods.
Others chalk the stagnant salaries up to changing demographics. Any gains that younger workers are getting are masked by the fact that baby boomers are starting to retire.
Those baby boomers are often the most experienced, skilled and highly compensated people in an organization. When they retire, they are often replaced by younger people who earn less.
There are some corners of the local economy where pay increases are speeding up.
There was a 9.7 percent jump in median salary for marketing and sales professionals, possibly reflecting companies’ efforts to expand after years of hunkering down. There was a 9.1 percent median salary jump for legal professionals and a 6.2 percent jump for IT workers, job categories that have historically paid well.
Then there are the jobs where good pay is not just tied to a skill. Employees who have security clearances, a sought-after commodity in Washington’s contracting community, have received larger pay increases than people doing comparable work without a clearance.
Among a sample of government contractors surveyed by Akron, 48 percent said they offered higher pay for cleared employees, up from 43 percent last year.
“This is a clear reflection of the challenge of all companies in getting new people cleared,” said Alan Chvotkin, general counsel at the Professional Services Council, which lobbies on behalf of government contractors.
Cleared employees, many of them former military veterans, typically made between 5 and 15 percent more than their non-cleared counterparts. Senior research analysts and high-level administrators earned 50 to 60 percent more when they had clearances. Even receptionists can expect a 15 percent bump in pay by virtue of holding an active clearance, the survey found.