New York ? U.S. employers this year and next are handing out the smallest pay raises since at least the mid-1970s.

Companies surveyed in two studies said they have budgeted raises averaging 3.3 percent to 3.5 percent this year and plan about the same next year.

The belt-tightening reflects rising worker health care bills and pension costs and a weak economy that has made it difficult for companies to raise prices for their products, according to a survey to be released today by Mercer Human Resources Consulting.

Also, the small raises reflect the anemic job market, with its oversupply of workers, according to the Mercer survey and another put out last month by the Conference Board.

Employers in both surveys said they expect to grant median increases of 3.5 percent in 2004. With inflation, employees will see real gains of less than 1 percent this year and next.

During the past 10 years, pay increases have topped the rate of inflation by between 1.1 and 2.6 percentage points, according to the Mercer survey.