Wages are expected to increase by 4% in 2024. Is it enough?

Employee Benefit NewsBy Employee Benefit News
November 1st, 2023 • 2 Minutes

Recent history’s record inflation rates have challenged workers’ ability to save — and while consumer price increases are finally starting to slow, wages aren’t likely to catch up.

For the third year in a row, companies are planning a median raise of 4% for their employees, according to Salary.com, which provides compensation market data, software and analytics. Previously, the average increase hovered around 3%, but a competitive job market in the background of record inflation rates led to a new norm, explains David Turetsky, vice president of consulting for Salary.com.

And yet, inflation reached a decades-high record at 8.5% in 2022, pushing the cost the living by more than double the increase of wages. And although inflation currently sits around 3.7%, wages still won’t match the cost of living even if their growth outpaces inflation. In fact, the average salary in 2018, accounting for inflation, has the same purchasing power it did 40 years ago, according to Pew Research Center. People make more but can’t afford more — and that’s by design.

Read more: 15 companies with the best compensation packages, according to employees

“As a compensation professional, we don’t index our salary increases just on inflation. We don’t even really look at inflation,” says Turetsky. “We base it on what happens in the [job] market.”

Depending on one’s industry, expected raises vary: media, hospitality, healthcare and retail will see median merit increases hover around 3%, while energy and utilities, finance, construction and aerospace are predicted to rise by 4%. It comes down to which industries and employers have decided they cannot afford to lose talent, and which industries are pressured to work with less talent to maximize profit in the short-term.

“The ones that are facing the highest pressures are the ones that are being squeezed on margin constantly, like hospitality and healthcare,” says Turetsky. “Whether it’s construction or financial services, you’ll see a higher increase purely because they can’t afford not to.”

Read more: Lilly, Pfizer, Humana among best healthcare companies to work for

Salary structures may see slower growth in 2024, according to Salary.com. While salary ranges for job positions rose by 3% in 2023, it may fall back to 2.5% in the new year. Turetsky considers this move a “fait accompli”, or something that has been decided before those affected can hear about it, let alone weigh in. But he’s uncertain of whether employers will be able to hold to that decision.

“They’re going to have to either renovate their structures or actually increase them by more,” he says. “Employees are going to get frustrated being at the max of their [pay] structure. It’s not the greatest thing to tell an employee.”

Read more: Student loan payments are due. Can employees catch up?

Turetsky notes that employers are likely trying to slow the rate of pay growth, now that the job market is not as constrained as it was during the Great Resignation, over three years ago, and hiring rates have slowed.

Still, Turetsky advises employers to at least be transparent about why their workers are seeing certain salary structures and raises in the coming year. Employees shouldn’t feel like their company is hiding profit from them.

“Be honest about your increases, how you’re going to be spending your money and spend it carefully,” says Turetsky. “The worst thing you can do is to try to obfuscate and lie about why increases aren’t as rich as you’d like them to be.”

This article originally appeared in EBN and was written by Deanna Cuadra Senior Reporter, Employee Benefit News. It is being reposted with permission.

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