Slack economy cuts into workers’ raises

Associated Press

NEW YORK — A growing number of companies, hunkering down after the Sept. 11 attacks, are paring workers’ annual bonuses and reducing pay raises for this year and next, new surveys show.

Cutting costs as profits wither, nearly half of employers plan smaller year-end bonuses for rank-and-file workers than in 2000, according to a poll of 110 firms done in mid-October by consulting firm Watson Wyatt Worldwide.

More than one in six companies say they have cut or frozen pay or reduced raises for the remainder of this year, according to a survey of 194 firms by Organization Resource Counselors, a management consulting firm.

Between a fifth and a quarter of all firms plan similar action next year.

Yet another survey, of 340 midsized and large companies, found one in five have scaled back or delayed pay increases. The companies, which reported in April they planned raises of 4.4 to 4.6 percent in 2002, said in early October they will shave back increases to 2.9 to 3.1 percent, according to William M. Mercer Inc.

Plans for more generous raises were based on wishful thinking that has evaporated in recent weeks, analysts said.

"What happened on September 11 is the expectation of a comeback in the fourth quarter just ended, and some companies got clobbered," said Steve Gross, a compensation consultant for Mercer.

Some of the cutbacks in pay, coinciding with large layoffs at many firms, were already likely given the downturn that began long before Sept. 11, analysts said. But the economic shock of the attacks has raised concerns about profits at many companies and spurred more of them to cut costs.

"Had we surveyed this group of people at the end of August, we probably would have heard many of the same things," said Laury Sejen, a compensation consultant for Watson Wyatt. "But I think following the 11th and some of the immediate impact that had on the economy as a whole … it just made the changes more rapid."

Many companies, still analyzing the impact of the attacks on their business prospects, have postponed decisions on bonuses and raises or could rethink plans in coming months, analysts said.

The findings of the three surveys largely echo one another, showing companies are adopting a handful of common strategies to rein in payrolls.

The findings indicate that some of the cuts announced by individual companies may indicate broader trends. In one of the most aggressive moves, Tribune Co. said this week it will cut senior managers’ pay by 5 percent and freeze wages for nonunion employees.

A relatively small group of companies say they have frozen or cut pay. The Organization Resource Counselors’ study found about 8 percent of companies have frozen pay for the remainder of this year for rank-and-file employees.

But at companies taking that action, freezes and cuts in pay are targeted particularly at top executives. The Watson Wyatt poll, for example, found 2 percent of companies have frozen or cut pay for hourly employees, professionals and midlevel managers, and the same number are considering such changes for those workers.

About 5 percent have taken that step for senior management and another 4 percent are considering doing so, the study found.

Many more firms are trimming bonuses or the pay increases planned for 2002.

In the Watson poll, 48 percent of companies said they’ll pay smaller bonuses this holiday season to rank-and-file employees, 54 percent will cut bonuses to middle managers and 60 percent will do so for top executives.

About 24 percent of companies surveyed by Organization Resource Counselors said they will trim pay raises next year for rank-and-file workers, and 30 percent said they anticipate the need for more layoffs.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

Customers enter and exit the Costco on Dec. 2, 2022, in Lake Stevens. (Olivia Vanni / The Herald)
Costco stores could be impacted by looming truck driver strike threat

Truck drivers who deliver groceries and produce to Costco warehouses… Continue reading

Two Washington State ferries pass along the route between Mukilteo and Clinton as scuba divers swim near the shore Sunday, Oct. 22, 2023, in Mukilteo, Washington. (Ryan Berry / The Herald)
Ferry system increases ridership by a half million in 2024

Edmonds-Kingston route remains second-busiest route in the system.

Alina Langbehn, 6, center, and Vera A., 6, right, sit on a swing together at Drew Nielsen Neighborhood Park after school on Tuesday, Jan. 28, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Everett council votes to renovate Drew Nielsen Park

Construction on the $345,000 upgrade could start as early as this fall.

Northshore School District bus driver Stewart O’Leary pictured next to his buses shattered drivers side windshield on Friday, Feb. 14, 2025 in Bothell, Washington. (Olivia Vanni / The Herald)
‘Put me in, coach’: Bus driver back at work after struck by metal bar

Stewart O’Leary, a Northshore employee, has received national attention for his composure during a frightening bus trip.

Lynnwood councilor Joshua Binda speaks during a Lynnwood City Council meeting on Wednesday, Nov. 20, 2024. (Olivia Vanni / The Herald)
Does the Lynnwood Council VP live in Lynnwood? It’s hard to say.

Josh Binda’s residency has been called into question following an eviction and FEC filings listing an Everett address. He insists he lives in Lynnwood.

Robin Cain with 50 of her marathon medals hanging on a display board she made with her father on Thursday, Jan. 2, 2025 in Lake Stevens, Washington. (Olivia Vanni / The Herald)
Running a marathon is hard. She ran one in every state.

Robin Cain, of Lake Stevens, is one of only a few thousand people to ever achieve the feat.

People line up to grab food at the Everett Recovery Cafe on Wednesday, Dec. 4, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Coffee, meals and compassion are free at the Everett Recovery Cafe

The free, membership-based day center offers free coffee and meals and more importantly, camaraderie and recovery support.

The Everett Wastewater Treatment Plant along the Snohomish River on Thursday, June 16, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Everett water, sewer rates could jump 43% by 2028

The rate hikes would pay for improvements to the city’s sewer infrastructure.

The bond funded new track and field at Northshore Middle School on Thursday, Oct. 24, 2024 in Bothell, Washington. (Courtesy of Northshore School District)
Northshore School District bond improvements underway

The $425 million bond is funding new track and field complexes, playgrounds and phase one of two school replacements.

An American Robin picks a berry from a holly tree on Thursday, Feb. 13, 2025 in Edmonds, Washington. (Olivia Vanni / The Herald)
Calling all birders for the annual Great Backyard Bird Count

The Audubon Society will hold its 28th annual Great Backyard… Continue reading

A view of one of the potential locations of the new Aquasox stadium on Monday, Feb. 26, 2024 in Everett, Washington. The site sits between Hewitt Avenue, Broadway, Pacific Avenue and the railroad. (Olivia Vanni / The Herald)
Initial prep work for AquaSox stadium to start, with $200k price tag

The temporary agreement allows some surveying and design work as the city negotiates contracts with designers and builders.

Aaron Kennedy / The Herald
The Joann Fabric and Crafts store at 7601 Evergreen Way, Everett, is one of three stores in Snohomish County that will close as part of the retailer’s larger plan to shutter more than half of its stores nationwide.
Joann store closure plan includes Everett, Arlington, Lynnwood locations

The retail giant filed a motion in court to close approximately 500 stores in the U.S.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.