The squeeze is on for white-collar workers.

Despite hopes that an improving economy would bolster wages, salary increases for white-collar workers are stuck at an average 3.4% this year and are expected to total no more than 3.6% next year, according to human-resources consulting firm Hewitt Associates.

The skimpy pay raises for the white-collar crowd follow two prior years of lean increases. After steady 4% and 5% increases during every year but one in the 1990s, raises for white-collar workers fell to 3.6% in 2002 and 3.4% in 2003, Hewitt notes. "We're in a very underwhelming pay-increase period," says Peter LeBlanc, senior vice president at Sibson Consulting, a New York-based human-resources consulting firm.

By contrast, compensation for chief executive officers and their top lieutenants is still generous. CEOs in office at least two years received a 7.2% increase in salary and bonus in 2003 to a median of $2,118,000, according to an analysis of proxy statements for 350 major U.S. corporations prepared for The Wall Street Journal by Mercer Human Resource Consulting, New York.

Ira Kay, practice director of compensation consulting at human-resources consulting firm Watson Wyatt, expects CEO salaries to rise this year in the range of 5% or 6%, in line with last year. Average CEO base salaries rose about 6% in 2002 and again in 2003, according to a study by Watson Wyatt of 373 companies in the S&P 500 with the same chief during the period.

What's more, other rewards that continue to sweeten top executives' compensation packages -- for example, restricted stock and stock options -- are shrinking for lower-level employees, says Robert M. Fields, a lawyer based in South Salem, N.Y., who negotiates employment contracts.

Why the pinch? Even in industries that are on the upswing, companies are feeling pressure to rein in operating costs because of intense global competition. In addition, many companies are having trouble making skittish consumers pay more for their products, from televisions to clothes to cars. Unable to increase revenue through price increases, they are wary of increasing costs with salary increases. Job growth also has been weaker than expected.

White-collar workers are defined as "salaried exempt" -- salaried employees who aren't executives and for whom overtime pay isn't required by the Fair Labor Standards Act -- and by some lights they shouldn't complain. Further down the corporate ladder, hourly workers have seen a small decline in the value of their wages since 2003, once inflation is accounted for. For most hourly workers, real average hourly wages "have gone nowhere over the past year," says Jared Bernstein, a senior economist at the Economic Policy Institute in Washington.

Tightening the pinch for white- and blue-collar workers alike is the continuing high price of gasoline and the rising costs of higher education and health care.

Though consumer prices overall were just 2.5% higher in September than a year earlier, and prices of items such as computers, cars and household appliances fell, Americans now pay about $2 a gallon for regular unleaded gasoline, compared with an average of $1.56 last year and $1.35 in 2002, according to AAA, the auto association. Tuition at four-year public universities and colleges is up 10.5% this year over last, according to the College Board. And the average employee is paying $1,288 in health-care premiums this year, a nearly 20% increase over last year, according to Hewitt. In 2005, that figure is expected to rise to $1,481.

When Phil VandenToorn, an accountant for an auto-parts distributor in Grand Rapids, Mich., and his wife had their first child this year, their annual health-care premiums were set to rise about 40% to nearly $6,000 a year. But he got only a 3% raise last year and hasn't gotten one yet this year, although his employer has promised him one in December. To save money, he found a cheaper health plan that offers less coverage through Web site eHealthInsurance.com.

Raises do vary by industry. Salaries for white-collar workers in insurance rose 3.9% this year and 3.8% in the accounting and legal businesses, according to Hewitt. But salaries rose just 2.8% in education and 3% in real estate.

In many sectors, it's harder to get a pay increase when switching jobs. In April, Midge McCagney, a 54-year-old New Yorker, resigned her position as a trust associate at Wachovia Corp. where she earned a salary in the high $50,000-range. All the companies where she has since interviewed have offered her less. One company offered her $8,000 less annually for a position that would have required her to work long hours on occasion. She now earns $18 an hour as a temp at a small investment-management fund, which is the same rate she earned 10 years ago.

Even when companies are willing to spend on new hires, they often still squeeze existing employees. Some marketing and advertising companies, for instance, are offering 10% to 15% salary increases to new hires, but only 2% to 3% raises to existing employees, says Eric Goodstadt, chief marketing officer at Management Recruiters International Inc., Philadelphia, a big recruiter of midlevel professionals. Construction companies are offering 10% salary increases to grab "the best of the best," in positions such as project management, but current employees are lucky to get any raise at all, Mr. Goodstadt says.

Even in businesses where hiring is strong, raises can remain low because the job market as a whole is mixed. So while pharmaceutical companies have been hiring a lot of salespeople, raises are small because there are so many salespeople in weaker industries. "While there are plenty of jobs for candidates to obtain, there are also enough candidates because people are coming from other sectors," says Mr. Goodstadt.

To compensate for low base-salary raises among white-collar staffers, more employers are turning to variable pay programs -- bonuses, for example -- in which performance-based compensation must be re-earned each year. This puts the onus on the employee to prove himself rather than guaranteeing him a raise. Nearly 80% of companies have at least one kind of variable pay plan, an increase from just 59% in 1995, according to Hewitt. "It's a much safer route for employers to take," says Hewitt's Ken Abosch.

For employees, "the accountability and stress are going up while the rewards are going down," says a software developer for Microsoft Corp. who earns $72,000 a year. He received no raise this year, and his bonus shrank to $5,000 from $12,000. "Combined with all the cost-cutting measures that affect employee pay and benefits, it's definitely made people reconsider outside job offers," he says.