Inflation offsets pay increases in DC metro region

Inflation offsets pay increases in DC metro region

For the first time since 1979, the average salary increase in the Washington area was less than the rate of inflation, suggesting economic activity in the region will not be rebounding soon. Wages as a whole for metropolitan Washington rose .04 percent in 2011, according to the latest salary survey done for the Human Resource Association of the National Capital Area. The rate of inflation in the region rose 4.1 percent in July (the latest month for which the figure is available) compared to a year ago.

For an employee making $100,000 and getting a 2 percent increase, with the rate of inflation at 3 percent, it means he/she is in the hole by $1,000, said Angelo Kostopoulos, president of Akron Inc., a District-based research firm that compiled and analyzed the survey data.

The Washington region traditionally posts salary increases above the national average because of its abundance of highly educated and highly skilled workers, but also because federal spending and the local economy are so closely tied. Hence, when the government reins in payroll spending, the DC regional market feels the pain.

According to Akron Inc.s Kostopoulos, the smaller raises in 2011 will mean at least $122 million less spending money available in the area and likely much more than that as the figure only accounts the 75,000 employees who hold positions covered by the survey.

Moreover, some 380,000 metropolitan Washington residents work in the federal government, and experts estimate that the governments wage freeze will cost the local economy hundreds of millions of dollars this year and next year.

Economists say the lack of a sizable pay raise for non-government workers and the wage freeze for the more than 380,000 federal employees is not likely to damage the regions economy as it did in 1995, when a government shutdown kept thousands of federal staffers out of work. It will affect all sorts of purchase decisions, however, ranging from haircuts to clothing to cups of latte, and, perhaps, to vehicle sales.

If people keep their belts tightened for another year, that will have an impact on the malls and all retailers, said Jim Dinegar, president and CEO of the Greater Washington Board of Trade.