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The dog days of summer are upon us - west coast skies are smoky and the east coast is humid and stormy. The economy is tanking, but if you stretch the concept of good news, employers are coming to the rescue with talk of small pay raises next year.

On the whole, I wouldn’t spend that expected 3.5 percent pay hike in Bermuda or Hawaii. Suffice to say, that merit pay increase isn’t keeping up with price of milk and sugar, much less gas.

Watson Wyatt Worldwide, a global HR consulting firm, surveyed 1,389 employers globally, including 276 in the U.S., said that employees who exceed expectations may expect to receive between 4.2 percent to 6 percent merit pay increases, so maybe that’s an incentive for you to work harder this year.

Laura Sejen, global director of strategic rewards consulting at Watson Wyatt, claims that “Employees will view holding merit increase budgets steady as a positive sign that will help them offset inflation and higher energy and food costs.” I beg to differ.

Although employees want to see their employers spend wisely and can deal with belt-tightening measures, low pay raises impact motivation and productivity. Employees will be much more likely to switch jobs to achieve higher compensation, because clearly waiting for a decent raise could be a 2010 event. Does that motivate you?

Wait, it gets worse. The Watson Wyatt survey also finds that 33 percent of employers have not made any formal contingency plans for future economic downturns. Two out of three U.S. employers, however, have a “contingency” plan in place, including:

• Layoffs - 52 percent
• Organization restructuring - 46 percent
• Hiring freeze - 39 percent
• Smaller pay raises - 27 percent
• Salary freeze - 13 percent

Are you motivated or de-motivated by these numbers? Here’s one way to motivate yourself: Gently ask how your employer plans to deal with the economic downturn and how their plans may affect your compensation in the next 12 to 18 months.