Raises won't keep up with the cost of living in 2024

The last few years have been especially hard on Americans' savings, with record inflation rates widening the gap between wages and cost of living — and it doesn't look like most employees can expect raises to make up the difference.

While 74% of business leaders anticipate giving raises this year, half noted that pay increases will impact 50% or less of their workforce, according to a survey from Resume Builder. Of employers giving raises, 69% will offer cost-of-living bumps; 50% will offer a raise of 3% or less. And while inflation is expected to drop below 2.5% in 2024, according to the Federal Reserve Bank of St Louis, a 3% raise will not make up for prices increasing by as much as 9% in 2022. 

"When you hear the word raise, that implies that after you receive one, the quality of your life will increase because you're earning more money," says Stacie Haller, chief career advisor at Resume Builder. "If your raises are not as high as the inflation rate in the economy, you're really not getting a raise."

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Notably, average raises in 2022 hovered around 3%, falling far below the 2022 average inflation rate of 8%. Haller also underlines that just because inflation is slowing down, it doesn't mean that prices are actually dropping — they're increasing at a slower rate.

And yet, raises are rarely defined by inflation rates, which explains the loss of buying power Americans have suffered over the decades. According to the Pew Research Center, an average weekly earning of $232 in 1979 has the same purchasing power as $840 in 2018, just around $50 less than the average weekly earnings of that year. If employees were truly getting raises, $840 would have more buying power. Meanwhile, employee productivity rates have grown over three times as fast as the rate of wage growth.

"People want to get paid to have a good living, pay their bills and earn what they're worth," says Haller. "Otherwise, employers have to assume that they will have some attrition. There will be a group of workers who will need more money, and they're going to look for another position." 

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According to Resume Builder, employers will continue to prioritize raises for their executive and senior employees, with one-third of respondents saying this group was the most important to compensate — another third prioritize mid-level employees. However, Haller warns employers that employees are becoming increasingly enraged over the disparities between executive salaries and their own. 

"If your organization is giving some people a 3% raise while the seniors and executives are making 300 times what the average worker is making, I don't know how you can defend the ethics of that," she says. "That's why you're seeing all these strikes. It's intolerable to employees."

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While the pendulum has swung from an employee-friendly job market to one that is relatively more competitive, Haller thinks employees still have leverage as hiring and retention challenges continue to cost businesses. 

"Hopefully, everybody can find a workplace where they can be happy and earn what they deserve," says Haller. "And employers can grow their businesses and share profits with their organization. Employers can't put the genie back in the bottle on these issues [of pay], no matter how much they want to."