Although the economy has been adding jobs for the last 95 straight months, since October 2010, wages have not seen much in the way of gains during all that time. As economists and researchers have studied the reasons for this wage stagnation, they have come to several conclusions, including the following:
- Unionization has declined
- Competition has been restrained
- Globalization has drawn new talent
- Automation has replaced some workers
- Productivity has not grown
- Outsourcing has traded flexibility for wage growth
As the economy has gone into high gear in the wake of tax cuts, however, economists have noticed that wages are finally beginning to rise for at least some jobs. But what about executive salaries? Like many salary issues, the reality of whether executive salaries have risen or are likely to rise is somewhat complicated.
Should Higher Executive Salaries Be Expected?
Executive salaries are more complex because they involve more than salary and benefits. In many cases, even if the base salary stays the same, bonuses and stock options can be increased in order to effectively increase the total compensation package. One study done early in 2018 said that executive salaries were expected to rise about 3 to 5 percent, but whether this will really play out is difficult to say.
One thing that may hold executive salaries down is that some already make 100 to 250 times as much as an average employee in their company. Popular and political pressures have pointed out how inflated CEO salaries have become, and have asked why CEOs deserve to make tens or hundreds of millions per year.
But not all executives receive sky-high compensation. There are many other executive positions under the CEO that make less than they do. Non-profit executives also make generally much lower salaries than those in the profit sector, at least for similar-sized organizations. Smaller local companies also have much lower executive salaries, even as low as the low six figures.
Supply vs. Demand
One thing that could influence executive salaries to increase, however, is the principle of supply vs. demand. If it becomes more difficult to find top-notch executives to fill positions, salaries are likely to go up as competition for scarce talent gets fiercer. It isn’t currently clear whether the tight talent market has extended to the executive level, where talent has been ubiquitous for some time (if not always top notch). It remains to be seen whether talent will become scarce enough to drive salaries up significantly or not.
Ultimately, your in-house executive recruiting team can’t avoid taking the time to do salary research for each specific position you plan to fill. It’s also important to understand how executive salary trends track with mainstream salary trends, and how they follow their own logic.
As your in-house executive search team considers salaries as part of making an offer at the conclusion of an executive search, Thrive TRM’s data collection and analysis capabilities can help you determine what salary to offer and to which candidate. Contact us for more information about everything Thrive TRM can do.