57% Of Americans Say Their Pay Raises Aren’t Keeping Up With Inflation

Over the past year, many workers have found their salaries aren’t enough to cover rising prices due to soaring inflation—and this includes employees who received raises. Among those who received raises, two-thirds received an increase of just 1% to 5% of their salary, well below the current rate of inflation.

And those getting a salary bump are the lucky ones: Only 56% of Americans who work full time received a pay increase in the past year, a YouGov survey of 1,500 adults for Forbes Advisor found.

 

Talk of the Great Resignation and labor shortages suggests that employees have the upper hand in a hot hiring market. But people staying in their jobs may be getting left behind financially, thanks in part to inflation of nearly 8% over the past year.

Shannon, an assistant manager at a women’s apparel store in Minnesota, received a merit raise of just 3% last summer, raising her hourly pay from $18 to $18.54.

“It slapped me in the face a little bit because the store was doing well,” says Shannon, who asked us not to use her last name because she still works at that store.

She said most associates at her store got even smaller raises of about 15 cents per hour.

Jay Starkman, founder and CEO of human resources firm Engage PEO, was surprised at the 44% of respondents who hadn’t received a raise, especially in a job market packed with opportunities for workers.

“I don’t see how employers can keep employees in this age without giving out periodic raises,” Starkman says. “These employees that aren’t getting raises are going to leave.”

Pay Raises Are Often Painfully Low—and Inflation Can Cancel Them Out

The most common raise respondents received in the past year was 3% to 5% percent of their current salary, while the second most common was a raise of just 1% to 2%.

The highest raises—10% or more—typically went to the highest earners, respondents with annual incomes of $150,000 or more.

And higher earners were more likely to have received a raise last year. Sixty-seven percent of respondents from the highest income group received a raise in the past 12 months, while only 46% of people in the lowest income group reported the same experience.

A raise of just a few percent may only add a couple of cents to someone’s hourly wage. But even a larger raise may just nudge ahead of inflation and barely cover ballooning costs of everyday items.

In the lower and middle-income groups, at least half of respondents said their latest raise isn’t enough to cover surging inflation. Only in the highest-earning group did fewer than half (46%) say their raise isn’t enough to cover increases; 43% said their raise was enough to account for increases, while 11% said they weren’t sure.

Read more: Here’s What’s More Expensive As Inflation Continues To Rise

If Shannon had received a 10% raise on her original $18 per hour pay, her new rate of $19.80 per hour would only grant her about $290 extra before taxes each month. Before it’s even set aside to pay for her wedding that’s slated for next summer, it could end up going toward gas or groceries.

Some workers are finally getting long overdue wage increases. At the start of the year, the minimum wage increased in 21 states, with four more states to come in 2022, according to a report from the National Employment Law Project. But in 20 states, the minimum wage remains at the federal minimum of $7.25, an amount that hasn’t changed since 2009.

Meanwhile, some companies are raising their minimum wage for workers. Target recently announced a starting pay of up to $24 per hour, depending on where you live, your role in the store, and number of hours you work.

But just because wages are going up in some areas and industries doesn’t mean immediate higher salaries for all. You may have to wait for an anniversary or performance review to find out if you’ll get a thicker paycheck. And like nearly half of the respondents to our survey, you may not receive a raise at all.

The most common type of raise survey respondents received was a performance-based increase (39%), and the second most common reason was a cost of living raise (29%).

But those cost of living raises–which have been at the crux of much of the fight to raise the minimum wage—are not enough for many workers, especially those at the lower end of the earning spectrum.

The widespread inflation consumers are experiencing stems in part from supply and demand imbalances as purchasing ramped up after the early periods of the pandemic. But the Russian invasion of Ukraine is expected to push prices even higher, especially now that the U.S. has begun to block imports of fuel and other commodities from Russia.

Shannon says it takes an extra $10 to $15 to fill up her gas tank each week for her 50-mile round trip commute. In 2021, she and her fiancé allowed a friend to move into the spare bedroom of their apartment to make their $1,500 rent payment more manageable.

Shannon says she tries not to think about her increasing costs. “When I do, I usually just feel overwhelming anxiety about my own financial situation, like how am I going to be able to improve my quality of living? Ultimately, I try to ignore it until I can’t. And when I do, it’s just a lot of anxiety.”

Is Quitting the Best Option to Get a Raise?

Half of the survey respondents said they’ve considered quitting their job to get a higher salary elsewhere.

And while looking at job listings and sending applications may be easy, actually making the leap to a new role may be more tricky. If the pandemic taught us anything, it’s that pay isn’t the only reason to stay at or leave a company. Many workers are finding that flexible schedules or a strong relationship with their supervisor is worth more than money alone.

“The great resignation makes it sound like everybody is looking to quit their job,” says Starkman of Engage PEO. “It’s not that at all. They’re looking to improve their station, whether financially or in work-life balance.”

People who are changing jobs primarily to get paid more need to be offered about a 20% increase to make the move to a new job, says Tim Rowley, chief technology officer of PeopleCaddie, a digital talent marketplace that matches hiring managers and contractors.

Before you start applying to jobs, Rowley says to explore options at your current workplace.

“They do have leverage,” he says of employees hoping for a raise. “They should arm themselves with data and be prepared to have an objective conversation with their employer if it’s a place you truly want to stay.”

Reviewing job listings for similar roles can help you better understand the market rate for your area, which can help you make a case for a raise if you otherwise like where you work.

Though many industries have traditionally declined to list salary ranges on job listings, Paul Lewis, chief customer officer of job search engine Adzuna, says that’s changing. About 3% of ads on the site listed a salary in February, and sectors like information technology, public relations, advertising, and construction have increased salary disclosures.

Shannon says she researched pay for her region and falls right in the middle for pay for her experience level. She’d like to move up within her own company rather than look for a job somewhere new, so she’s willing to tolerate her hourly rate for now. But when performance reviews roll around again this summer, she plans to be ready to make a case for a bigger raise.

“I’ve been working with the same management team for a year, and the store has continued to succeed,” she says. “I’m better equipped with the tools I need to actually bargain and advocate for myself.”

Starkman says employers will continue to compete for qualified workers for the near future. “The economy will play into how much raises are required, but it’s not going to change the fact that you have to properly compensate your employees.”

Read more: How The Great Resignation Can Help You Get A Great Raise

If you do hit the job market, negotiating your salary when you first accept a new role can set you up for greater financial comfort. Shannon says she wished she had asked for more than $18 per hour when she took her assistant manager role in late 2020, because the company accepted her request without hesitation.

Whether you’re new to your role or sticking with a job you like, asking for frequent performance reviews (say, twice-yearly instead of annually) can give you more opportunities to advocate for yourself and your financial security.

Methodology: YouGov polled 1,500 US adults online on March 2nd, 2022. The survey was carried out through YouGov Direct. Data is weighted by age, gender, education level, political affiliation, and ethnicity. Results are nationally representative of adults in the United States. The margin of error is 2.5% for the overall sample. Learn more about YouGov Direct.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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