The Q1 2013 PayScale Index Falls: A Bump in the Road for Business?

Laleh Hassibi, PayScale

After three straight quarters of rapidly rising wages across almost every industry, job category and company size, Q1 2013 brought the first wage decreases since early 2011.  Although decreases were minor, wages are still up year-over-year across the board. It’s an interesting development since just recently, when PayScale’s Compensation Best Practices Survey was conducted in December 2012, businesses were overall expressing optimism about growth this year. Is this quarterly drop a blip on the radar, or an unexpected change on the road to economic recovery?

A Bump in the Road to Recovery
“Building upon the current political and economic climate, this quarter was a bump in the road to recovery, as wages fell in previously high-performing areas including IT, Biotech, and Oil & Gas Exploration. It remains to be seen if this quarterly drop is a blip on the radar, or a long-term trend,” said Katie Bardaro, Lead Economist, PayScale.

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Q1 2013 PayScale Index highlights for the United States and Canada include:

• Salary decreases for mining, oil and gas. A setback in the mining, oil and gas exploration industry had geographical consequences as well. The 0.4 percent decrease in wages in this industry likely drove the 0.1 percent wage drop in the Houston metro area, the largest drop this city has seen since mid-2010.
• Tech hotspots cooled off. Cities with a strong tech presence that were previous wage winners were wage losers this quarter. Wages in Boston, Minneapolis, and Seattle fell this quarter (0.7 percent, 0.4 percent and 0.2 percent respectively). Wages in San Francisco softened with a quarterly growth of 0.7 percent compared to previous quarters of more than 1 percent.
• Biotech was the hardest hit of any tech job family. Here, wages fell by more than 1 percent this quarter, compared to IT, where wages simply slowed their growth to 0.2 percent, and architecture and engineering, where wages dropped by a mere 0.1 percent.
• Kitchens across the nation are on fire. For the first time since we’ve released The PayScale Index, the food services and accommodation industry came out on top with the highest quarterly growth. Wages in this industry grew by 1.4 percent, which was the largest quarterly growth of any measure of The PayScale Index.
• Wages are down in manufacturing. Similar to information released by the Institute for Supply Management, which tracks manufacturing activity, PayScale found that the manufacturing sector’s expansion slowed in March. We found that wages decreased by almost 1.0 percent for the job category and 0.4 percent for the industry overall in Q1 2013.
• Small business wages are still rising. Small businesses, who were also the most optimistic in the Compensation Best Practices Report, gave out the only wage increases across different company sizes. Wages in Q1 2013 grew by 0.3 percent for small companies, but fell by 0.2 percent for medium companies and fell by 0.5 percent for large companies. For the first time, small company wage growth overtook large company wage growth.
• Calgary, Alberta experienced a slight bump in their wage growth this quarter, they are tied for second with Edmonton for top annual wage growth (3.4 percent). No surprise there as these are both oil towns, which is an industry that has experienced tremendous wage growth over the last few years.
• Toronto experienced relatively strong wage growth in Q1 (2nd among Canadian metros). This is no surprise as the financial sector, which is strong in Toronto, continues to experience a boom in wages overall.

Adds Bardaro:  “Although the growth for small companies was muted this quarter, they have experienced strong wage growth over the last few quarters and are still tops for annual growth with 5.5 percent (compared to less than 3 percent for medium and large companies). This wage growth for small companies is largely driven by two factors: 1) their competition with larger firms for top talent and 2) their ability to react and respond to labor market trends in a more fluid and immediate way.”

Learn more about the PayScale Index methodology here. Or, get a free trend report that reflects compensation trends in your industry and location here.