‘89 Pay Raises in County Expected to Trail Inflation Rate

Most Orange County workers are expected to receive 1989 pay raises averaging 5% to 5.3%, among the nation’s highest but still not enough to keep up with inflation, a national compensation-consulting firm said Monday.

Only senior management personnel are expected to receive pay hikes averaging 5.5%, equal to next year’s anticipated inflation rate, according to the nationwide survey by TPF&C;, an arm of the Towers Perrin consulting group in New York.

Economists have been noting for 2 years that personal income growth is slowing nationally. The TPF&C; survey indicates that the trend will continue into 1989.

In Orange County, the survey shows that the average raise for 1989 will be slightly lower than in 1988, even though the inflation rate is expected to be higher next year.

Discouraging as that news might be, it could be worse.

The survey, which included 63 Orange County businesses in its nationwide sample of 1,200 firms, showed that raises for hourly workers in Orange County are expected to be the highest of the 30 metropolitan areas studied.

Raises for management personnel in Orange County are expected to be the fifth highest in the country, behind Stanford, Conn.; Boston; Charlotte, N.C., and San Francisco.

Orange County’s strong showing was attributed to the area’s booming economy and thriving service and high-technology industries.

The survey shows that mid-size to large companies in Orange County “will continue to hold the line on payroll costs” and keep raises below the inflation rate, said Lawrence A. Wangler, manager of the compensation-consulting practice at TPF&C;’s Costa Mesa office.

For hourly employees, he said, that translates to projected raises of about 5%, down from actual 1988 increases averaging 5.2%. For a worker making $15 an hour, or $31,200 a year, that means a raise of 75 cents an hour, or $1,560 a year.

Mid-management personnel, according to the survey, should expect raises averaging 5.3%, down from 5.4% this year. That is a $2,650 annual hike for someone making $50,000 a year. Senior managers, however, are expected to receive pay boosts averaging 5.5% next year, which would boost an $80,000 annual salary to $84,400. In 1988, the average raise for senior management in the county was 5.4%, according to the survey.

Nationally, hourly workers are expected to see raises averaging only 4.7%, while mid-managers’ pay should go up by 5.1%. Senior management salaries, according to the national survey, are expected to increase an average of 5.3%.

In Orange Country, with its large service economy, Wangler said, the payroll often is a company’s largest single cost of doing business. “And fringe benefits are directly related to pay,” Wangler said. “So each time you increase the payroll, you increase the cost of the fringe-benefit package.”

That makes pay raises especially vulnerable when cost-cutting is the rule of the day at corporate headquarters.

The pay-raise trends tend to follow regional economies, with the lowest in depressed energy-dependent states like Colorado and Texas.

The spread between the highest and lowest, however, is relatively narrow. Senior managers in Stanford can expect the nation’s highest pay hikes at 5.9%, while those in Denver will get the lowest, at 4.5%, Wangler said.

Allan Halcrow, editor of Personnel Journal, said the TPF&C-survey; results “appear to be accurate. Everything we have seen indicates that raises for most people will be minimal to nonexistent, certainly for the next few months and probably throughout the year.” The magazine, published in Costa Mesa, is a national trade journal for personnel management.

Halcrow said pay hikes are expected to be throttled back “because most companies are looking to run lean and mean, and they attack salaries first because they are one thing that the companies are more or less completely in control of.”

Government regulations restrict cuts in many fringe benefits, health-care costs continue climbing and most companies have little control over rents, raw materials, transportation and other costs of doing business, making payrolls the easiest place to reduce expenses, Halcrow said.