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Workers Can Expect Bigger Paychecks in 2013

Salary hikes this year should outpace consumer prices.

Workers in the U.S. can expect salary increases to average 3.0% in 2013, up modestly from 2.8% in 2012, as the battered labor market shows increasing signs of life. Inflation should remain at about 2%, so workers will see real growth in wages. Although employers still cite concerns about the economy, raises have been creeping up since hitting a low of 1.8% in 2009. At the same time, the number of salary freezes and reductions has diminished.

Workers with the highest performance ratings are in store for an average raise of 4.7%; those with below-average marks will see just 1.3%, according to a survey by professional-services firm Towers Watson. More companies are adopting variable pay plans that reward employees for individual accomplishments. Firms will spend 12.1% of payroll on this type of pay in 2013—the highest percentage in the past 37 years, says consultant Aon Hewitt.

Employers are paying to find and keep workers. A survey by Buck Consultants found that 56% of employers expect to hand out hiring and retention bonuses this year, up from 52% in 2012.

Strength in mining and auto manufacturing will translate into more-generous raises, while budget cuts will crimp raises for government workers and teachers.

This article first appeared in Kiplinger's Personal Finance magazine. For more help with your personal finances and investments, please subscribe to the magazine. It might be the best investment you ever make.

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