How Microsoft pay raises could lift the region's economy

Every dollar of pay raise a Microsoft worker receives will create another dollar in the local economy, a Seattle economist said.

Dick Conway, co-publisher of the Puget Sound Economic Forecast, said, "This Microsoft news is good news. Maybe the inklings of good news in general."

Microsoft declined to give any specific numbers on how much it will spend on company-wide pay raises that Chief Executive Steve Ballmer announced Friday. The raises will not take effect until later this year, and employees will see different wage increases depending on their performance reviews, what area of the company they work in and where they work.

Conway said he could give some hypothetical estimates. Theoretically, he said, if the average local Microsoft employee makes $100,000 and receives a 10 percent raise, that would create another $10,000 per 40,000 Microsoft workers in the Puget Sound region, for a total of $400 million. (The average wage for a computer programmer in Washington state as of March 2010 was $91,631, according to state employment data.)

"Now typically, and this is based on models that we use for forecasting and simulation, if you create a dollar in income in the region, the multiplier effect will be equivalent to another dollar," he said.

He expects the extra money would go toward consumer spending, and would create jobs in retail, trade, services and could potentially decrease the number of layoffs in the state's public sector because of the revenue that would be generated by retail sales tax income. He does not expect the wage increases to have an impact on the housing market.

The hypothetical 10 percent raise would represent 0.7 to 0.8 percent of the total salaries of all Puget Sound workers in 2011.

"That number might sound small, but it certainly is significant," Conway said. "This is the kind of boost that we've been looking for to get us out of the recession. Technically the recession ended almost two years ago but in fact we've seen very little employment growth and very little income growth. So this is the kind of thing you hope to see to get the show on the road again."

Angela Marcello Paz Vega Rebecca Mader Eva Green Lauren Conrad