As the white-hot labor market of the past few years shows signs of cooling down, pay raises for U.S. workers in 2025 are projected to be slower than recent trends. Still, most employers will give salary bumps above the 3% threshold that has become the norm in the pre-pandemic economy.
Latest Forecasts Slightly Lower Than Prior Years
According to the latest data from compensation consulting firms and salary specialists, average pay raises next year will range from 3.5% to 3.9%. Though below the actual 4% increase in 2023 salaries and 2022’s 3.6%, that still exceeds historical averages.
A summer survey by Payscale, released in August, found that managers foresee boosting pay by 3.5% next year based on economic uncertainty and easing hiring challenges. Two-thirds expect flat budgets compared to 2024, while 19% anticipate increases and 15% decreases.
A similar poll by WTW of around 32,000 organizations projected 2025 salary budgets growing 3.9%, down almost 2 percentage points from 2023 estimates. Empsight’s preliminary figures point to median merit hikes of 3.5%.
Slowing Turnover Among Factors
Experts attribute the slightly slower projected wage growth to various factors, especially a cooling economy after historic levels of resignations and turnover. WTW’s research showed 38% of employers struggling to attract and retain workers now versus 57% two years ago, a nearly 20-point drop.
Yet while labor market pressures may be easing overall, they remain intense in some industries where talent is scarce. Payscale determined the biggest raises on tap for 2025 will be in government and engineering/science jobs, averaging 4.5% and 4.2% respectively.
Conversely, increases in retail, customer service and education will likely stay below 3.1%. But regardless of differences between sectors, stiff competition means employers without clear compensation strategies risk losing top staff during upcoming budget cycles.
Inflation Outpacing Pay Gains
Despite substantial salary increases in recent years, many employees feel like they’re treading water as steep consumer prices undermine their purchasing power. One survey this year found over half of workers believed their pay lagged behind inflation.
An analysis by Payscale tracked a 33% cumulative rise in U.S. wages since 2006. However, after accounting for inflation, it turned out that real incomes declined by 12.6% over that period. Essentially, workers’ current pay checks buy less than what they did 15 years ago.
The pressure on household finances persists even as overall price growth shows some signs of easing. After the exceptionally volatile pandemic economy pushed inflation to historic highs last year, it has cooled slightly but remains well above the Federal Reserve’s 2% target.
For more Employee Benefits resources, contact INSURICA today.
Copyright © 2024 Smarts Publishing. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.Â
About the Author
Share This Story
Related Blogs
Five Strategies for Reducing Workers’ Compensation Costs
When a company experiences significant increases in workers’ compensation costs, it usually triggers internal activities aimed at reducing insurance costs and spending. The key to spending fewer dollars is more than just stopping a few accidents; it is having a sound safety program designed to continuously improve. This is where a safety program that, at a minimum, is compliant with the Occupational Safety and Health Administration (OSHA) standards can yield significant savings for by reducing injuries and illnesses, saving workers’ compensation dollars.
Hidden Risks of Summer School: Operational Safety Strategies Schools Can’t Ignore
Summer school risk management is essential to ensuring student and staff safety during the warm months. Many districts overlook the unique challenges tied to summer school risk management. Often, summer sessions operate in secondary campuses, under temporary staffing, and with reduced oversight—making them vulnerable. Proactive planning is essential to keep students and staff safe in environments that may not be designed for extended year-round use.
Navigating Cybersecurity Challenges in the Construction Industry
The construction industry is continuously moving toward digitization, adopting advanced technology such as artificial intelligence, the Internet of Things (IoT) and Building Information Modeling software. These innovations help to automate tasks, reduce waste and improve efficiency, productivity and safety.