THEPAYSCALE

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Q42015

www.payscale.com | United States | Q4 | The PayScale Index 2

As companies realize that their workforce is the competitive differentiator during the best and worst of economic times, a solid compensation strategy that is based on current economic trends becomes crucial. Organizations need precise and timely data, along with the capabilities to accurately analyze that data, to make informed decisions about allocating a limited compensation budget. This is important both on the macro level of developing competitive compensation strategies and also on the micro level of determining market-based pay for individual employees.

Include The PayScale Index as a resource to stay informed of quarterly economic trends. The PayScale Index tracks quarterly changes in total cash compensation for full-time, private industry employees in 18 categories, for 3 company sizes and 15 industries across the 20 largest Metropolitan Statistical Areas (MSAs) in the United States.

In addition to The US PayScale Index, PayScale produces quarterly indices for the UK and Canada.

www.payscale.com | United States | Q4 | The PayScale Index 3

US National HighlightsFor the tenth time, we forecast the U.S. national wage growth for the upcoming quarter (Q1 2016). Using a time series model that incorporates unemployment rates and the Consumer Price Index, we predict wage growth in Q1 2016 to be a slight downtick of -0.2 percent, resulting in annual wage growth of 1.4 percent.

In our Q3 release, we forecasted U.S. national wages to increase 0.1 percent between Q3 2015 and Q4 2015 and we forecasted an annual growth of 0.6 percent. Our forecast for Q4 was directionally correct, but a bit pessimistic as the actual quarterly growth in Q4 was 1.1 percent and the actual annual growth was 1.5 percent.

See the online methodology for more details of how this forecast was calculated.

The PayScale Index: HighlightsNational Year-Over-Year Percentage Change by Quarter

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This graph shows how national wages have changed since 2006, with a forecasted annual wage change for Q1 2016 of -0.2 percent.

www.payscale.com | United States | Q4 | The PayScale Index 4

National by Quarter

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Wages Buy Less Today than in 2006: Real Wages down near 7 PercentWe provide a look at The PayScale Index (US) in “real” terms rather than nominal terms using the Consumer Price Index (CPI), which measures the average change in the price of a fixed market basket of consumer goods and services.

By incorporating the Consumer Price Index (CPI) into The PayScale Index, we produce a Real PayScale Index, which tracks the percentage change in real wages since 2006. This measures the buying power of the income for a typical full-time, private industry worker.

In making this adjustment for inflation, we see that nominal wages have not kept pace with inflation. In fact, real wages have dropped almost 7 percent since 2006. This means the increases observed in nominal wages are not enough to outpace the increases experienced in the prices of goods and services. In other words, the income for a typical full-time, private industry worker buys them less than it did in 2006.

Real wages essentially fell from 2006 until Q3 2008, at which point deflation set in, which is when the CPI falls and the purchasing power of money rises. At this point, real wages grew until Q1 2009. Even though we observed nominal wages falling during this point, they didn’t fall as fast as the price of goods and services and thus their buying power increased, which caused this real wage growth. After Q1 2009, the bottom fell out and real wages fell more than 7 percent over the next three years (from Q1 2009 until Q1 2012) and more than 8 percent since 2006. Since mid-2012, real wages

www.payscale.com | United States | Q4 | The PayScale Index 5

have bounced up and down, but still remain more than 8 percent below their 2006 levels. In late 2014-early 2015, real wages experienced a relatively large increase due to a drop in inflation and slight increases in wages. However, inflation started to once again increase in Q2 of 2015, causing real wages to once again dive bomb to 8 percent below their 2006 levels. Q4 brought another bright spot for real wages as relatively flat inflation and strong wage growth together brought real wages up to their highest point since the end of 2012.

Real National Index, Changes Since 2006

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Read more about how the Real Wage is calculated here.

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Q4 2015: Wage Winners and Losers in the last 12 MonthsUnlike last quarter, quarterly wage growth was largely positive across the numerous index measures. Annual wage growth ranged from 2.8 percent (Transportation Jobs) to -2.1 percent (Marketing & Advertising Jobs).

Q4 2015 12-Month Changes

For each PayScale Index category, we provide a ranking of the 12-month percentage change in wages experienced over the last year (i.e. the growth/loss in wages from Q4 2014 to Q4 2015). These rankings help to call out the winners and losers of the last year. To make comparisons, it’s helpful to know the 12-month percentage change in U.S. and Canadian national wages was 1.5 percent and 1.2 percent, respectively. Therefore, any value greater than 1.5 percent performed better than the national average for the U.S and any value greater than 1.2 percent performed better than the national average for Canada.

Data Insights by Metro, Industry and Job FamilyTech wages are not in a bubble.

• After falling for the first two quarters of 2015, wages for IT jobs once again grew in Q4. They experienced their largest quarterly jump since mid-2014 with 1.3 percent growth for the quarter, which resulted in an annual growth rate of 1.2 percent

• Similar to IT Jobs, both Biotech and Engineering jobs also had a decent uptick this quarter, expanding upon the growth they experienced in Q3. Quarterly wage growth for Biotech Jobs and Engineering Jobs was 1.1 percent and 0.8 percent respectively

• Engineering jobs have now tied health care jobs for the best wage growth since 2006 with 12.8 percent. IT jobs are just behind with 12.2 percent wage growth since 2006

• Due to this round of strong growth, the STEM powerhouse of IT Jobs, Engineering Jobs, and Science and Biotech jobs have all recovered from the major dip their wages took in the first half of 2015

• Metros with a high prevalence of STEM workers also performed well this quarter: San Francisco topped the list of metros for annual wage growth with 2.5 percent, while Boston and Seattle experienced annual growth of 1.4 and 1.3 percent respectively

www.payscale.com | United States | Q4 | The PayScale Index 7

Wages for Mining, Oil and Gas Exploration recovered in Q4

• Wages for this industry fell for the first three quarters of 2015, but then came back in a big way in Q4 with 1.6 percent quarterly growth

• Annual wage growth in this industry was a paltry -0.2 percent as the big increase experienced in Q4 wasn’t enough to fully recover from the dips earlier in the year

• Wage growth also occurred in the oil town of Houston – 0.9 percent for the quarter and 0.7 percent for the year. Unlike the industry, however, this growth (along with the growth in Q3) helped Houston to recover from its dip earlier on in the year

• However, given the price of a barrel of oil is around $40, which is less than half of the $90-$100+ prices seen last year, this wage increase is likely a flash in the pan and not signs of recovery. Whether the wage growth for the oil and gas industry is sustainable will hinge upon the price of oil and U.S. production levels

Construction and Real Estate Continue to Recover from Earlier Dips.

• Both the construction industry and the real estate industry were hit hard during the Great Recession, but began to experience significant wage growth in 2014 after some ups and downs post-recession. However, in Q2 2015, both dipped down slightly

• Q3 2015 brought about improvement as wages for workers in the construction industry and real estate industry grew (0.6 percent and 0.8 percent respectively), causing them to recover and then some from their earlier dip

• Q4 2015 was more of the same – strong quarterly wage growth for both Construction and Real Estate (0.7 percent and 0.9 percent respectively)

www.payscale.com | United States | Q4 | The PayScale Index 8

PayScale Index by Industry

Industry 12-month Percentage Change

(Q4 2014 to Q4 2015)

Arts, Entertainment & Recreation 2.7%

Business Operation Support Services 1.9%

Health Care and Social Assistance 1.8%

Transportation & Warehousing 1.8%

Finance & Insurance 1.5%

Manufacturing 1.5%

Professional, Scientific &Tech Services 1.4%

Real Estate and Rental & Leasing 1.4%

Construction 1.4%

Accommodation & Food Services 1.1%

Utilities 1.1%

Wholesale Trade 1.0%

Retail Trade 0.7%

Information, Media & Telecommunications 0.6%

Mining, Oil & Gas Exploration -0.2%

www.payscale.com | United States | Q4 | The PayScale Index 9

PayScale Index by Metro

Metropolitan Statistical Area 12-month Percentage Change

(Q4 2014 to Q4 2015)

San Francisco-Oakland-Fremont, CA 2.5%

Chicago-Naperville-Joliet, IL-IN-WI 1.9%

Riverside-San Bernardino-Ontario, CA 1.9%

Washington-Arlington-Alexandria, DC-VA-MD-WV 1.8%

St. Louis, MO-IL 1.8%

Baltimore-Towson, MD 1.8%

Tampa-St. Petersburg-Clearwater, FL 1.5%

Boston-Cambridge-Quincy, MA-NH 1.4%

Minneapolis-St. Paul-Bloomington, MN-WI 1.4%

New York-Northern New Jersey-Long Island, NY-NJ-PA 1.3%

Seattle-Tacoma-Bellevue, WA 1.3%

Los Angeles-Long Beach-Santa Ana, CA 1.2%

Detroit-Warren-Livonia, MI 1.0%

Miami-Fort Lauderdale-Pompano Beach, FL 1.0%

Atlanta-Sandy Springs-Marietta, GA 0.9%

Houston-Sugar Land-Baytown, TX 0.7%

Dallas-Fort Worth-Arlington, TX 0.5%

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 0.4%

Phoenix-Mesa-Scottsdale, AZ 0.0%

San Diego-Carlsbad-San Marcos, CA -0.4%

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Western US Metropolitan Areas116

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Midwestern US Metropolitan Areas116

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Southern US Metropolitan Areas116

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Northeastern US Metropolitan Areas116

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PayScale Index by Job Category

Job Category 12-month Percentage Change

(Q4 2014 to Q4 2015)

Transportation Jobs 2.8%

Installation, Maintenance & Repair Jobs 2.2%

Healthcare Practitioners and Technical Jobs 2.2%

Manufacturing & Production Jobs 2.0%

Media & Publishing Jobs 1.9%

Administrative & Clerical Jobs 1.9%

Construction Jobs 1.8%

Art & Design Jobs 1.7%

Legal Jobs 1.7%

Food Service & Restaurant Jobs 1.7%

Accounting & Finance Jobs 1.6%

Architecture & Engineering Jobs 1.5%

Information Technology Jobs 1.2%

Science & Biotech Jobs 1.1%

Human Resources Jobs 1.1%

Retail Jobs 1.1%

Social Service Jobs 0.9%

Sales Jobs 0.2%

Marketing & Advertising Jobs -2.1%

www.payscale.com | United States | Q4 | The PayScale Index 15

Data Insights by Company SizeThe PayScale Index also looks at trends by three company sizes: small (less than 100 employees), medium (between 100 and 1,500) and large (more than 1,500).

12-month Change by Company Size

Company Size 12-month Percentage Change

(Q4 2014 to Q4 2015)

Small Companies 1.4%

Medium Companies 1.4%

Large Companies 0.8%

Quarterly Change by Company Size

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FAQWhat is The PayScale Index?The PayScale Index measures the change in pay of employed workers over time.

What specifically does The PayScale Index measure?The PayScale Index tracks quarterly nominal changes in total cash compensation for full-time, private industry employees since 2007 (with a baseline of 2006).

In addition to a U.S. national index, it includes separate indices for the following:

• 15 private industry categories (as defined by the North American Industry Classification System / NAICS)

• 20 largest metropolitan statistical areas (as defined by the Office of Management and Budget) based on the July 1, 2009 population estimates by the United States Census Bureau

• 3 company sizes: Small (under 100 employees), Medium (between 100 and 1500 employees) and Large (greater than 1500 employees)

• 19 job categories (as defined, in part, by the Standard Occupational Classification (SOC) system)

• Canadian national index

• In addition to a national index, The PayScale Index (Canada) includes separate indices for six Canadian metropolitan areas

This year, we added three new features to our regularly released PayScale index:

• We provide a forecast of the National U.S. PayScale Index as of Q1 2014

• We released a PayScale Real Wage Index, which tracks the change in wages adjusted for inflation since 2006

• We released a national PayScale Index for the United KingdomPlease see the online methodology for more details into how The PayScale Index is calculated and the online FAQ for more details about the new features.

How is The PayScale Index data collected?PayScale collects data 24/7/365 from people throughout the world who complete a salary survey to find out what they’re worth. This always-fresh data is then subject to rigorous algorithmic and human validation processes to ensure its integrity before being accepted into our data set. The validated

www.payscale.com | United States | Q4 | The PayScale Index 17

data is then accessed from within our subscription software to provide highly accurate salary matches to your jobs in your unique labor markets.

How often is The PayScale Index published?The PayScale Index is released quarterly.

What can employers learn from The PayScale Index?Employers can use The PayScale Index to understand how trends in average wages are changing nationally. This information can be used to guide changes in midpoints of salary structures and grades, as well as give general guidance for pay adjustments for newly hired employees and raises for fully qualified employees.

While The PayScale Index is useful for understanding broad market forces, for creating a market-based compensation structure for a specific workforce, we recommend companies use PayScale’s Cloud Compensation Software.

Employees can use The PayScale Index to understand how the average market price (expected wages) for the services of broad categories of employees is changing. It provides an accurate measure of “typical” market price increases for fully qualified workers doing the same job in the same way for the same employer, as it is directly measuring the price of labor in the market.

How current is the data in The PayScale Index?Wage data is updated daily in the PayScale database. The PayScale Index measures quarterly pay trends and includes data through the end of the last month of the most recent quarter in the report.

Can I use The PayScale Index to set wages for my workforce?While the PayScale Index is valuable for understanding general trends for certain market segments, good pay decisions depend upon compensation data customized to your workforce like you get from PayScale’s cloud software. You get the most up-to-date data that is specific to your workforce, factoring in all the relevant market factors and trends that affect pay for your positions, along with software that makes it easy to manage.

www.payscale.com | United States | Q4 | The PayScale Index 18

Who is PayScale?Cloud software, crowdsourced data and unique algorithms power the world’s largest real-time database of rich salary profiles giving PayScale the unique ability to provide job seekers and employers alike immediate visibility into the right pay for any position. PayScale’s cloud compensation software is used by more than 3,000 customers including Bloomberg BNA, Cummins, Warby Parker, Clemson University and Signature HealthCARE.

For more information, visit http://www.payscale.com.

Looking for market information for your specific workforce?Use the interactive PayScale Index to view general trends by industry, metro, job family or company size. Or, better yet, get a free report, customized to a position specific to your workforce, to see how PayScale’s award-winning cloud compensation software can work for you.