“If you earn $100,000 and get a 2 percent increase and the rate of inflation is 3 percent, you’re already in the hole $1,000,” said Angelo Kostopoulos, president of Akron Inc., a District-based research firm that compiled and analyzed survey data for the Human Resource Association of the National Capital Area.
With its abundance of highly educated and highly skilled workers, the Washington region traditionally has posted salary increases above the national average.
The results of the survey reinforce the inextricable link between federal spending and the local economy: When federal spending grows, the region prospers. But when the government tightens its belt, the region feels the pinch.
“When the government says we need to cut [spending for contractors] 15 percent, that 15 percent gets passed down to little guys like us,” said Michael Whitecar, president of The Chief Information Group, a Falls Church-based contracting firm that provides information management for military hospitals.
Because the government is paying contractors less for the same services, Whitecar said, he and his partner took pay cuts and reduced raises for their 30 or so employees to about 1.5 percent from 3 percent last year. “We’re scrutinizing salaries a lot more than we did in the past,” he added.
Federal workers are not included in the salary study. Still, a federal wage freeze for fiscal 2011 and 2012 likely depressed private sector salaries as employers there often use federal wages as a barometer, experts said.
Smaller raises mean less money will be churning through the economy. The difference between the 2011 payouts and 2010’s 2.3 percent average raises is about $122 million. And that figure only counts the 75,000 employees who hold positions covered by the survey. The total would certainly go much higher when considering the thousands of other workers in the area, Kostopoulos said .
Moreover, some 380,000 metropolitan Washington residents work in the federal government, and experts estimate that the government’s wage freeze will cost the local economy hundreds of millions of dollars this year and next year.
Business watchers say the lack of a sizable raise is not likely to choke the region’s economy as it did in 1995, when a government shutdown kept thousands of federal staffers out of work. But it will surely affect all sorts of purchase decisions, from haircuts, to clothing, to cups of latte, to that new hybrid SUV.