Next year might be your best opportunity in over a decade to get a big raise.
According to the Conference Board’s recent Salary Increase Budget Survey, companies are budgeting more for wage increases in 2022 than they have at any point since 2008.
The 240 companies surveyed last month (more than half of which employ over 10,000 people) are planning to spend an average of 3.9% of their total payroll on wage increases next year. In a previous survey in April, companies said they were budgeting 3% of payroll for salary increases — that's a jump of nearly one full percentage point in just seven months.
The United States is in the midst of a major labor shortage, with record numbers of workers quitting their jobs and firms across industries hiking wages and offering incentives to attract and retain workers.
Employers are facing fierce competition to hire and retain good workers — and one way to keep employees is simply paying them more. The Conference Board has found wage growth over the past six to eight months has been especially strong for workers under age 25 and workers who have switched jobs within the past year.
On top of that, data from October showed inflation running at 6.2% on a yearly basis. So even with big increases in salaries, soaring prices may mean that many workers are still falling behind because money doesn't stretch as far as it used to.
The average new car is now selling for well over $5,000 more than it did in 2020. Gas costs some 50% more than it did a year ago too. Grocery prices are up 5.4% on a yearly basis, and household heating costs are soaring as well. Then there are skyrocketing housing prices: In August, data showed that it would take a first time homebuyer roughly seven years and 11 months to save up for a 20% down payment on a house, compared to seven years and one month to reach the same goal in January 2020.
According to the Conference Board’s new survey, 46% of companies plan to spend more on raises next year in part because of climbing wages for new hires, while 39% cited rising inflation as a reason they expect to spend more on wage bumps in 2022.
What to expect for job wages in 2022
“It is likely that severe labor shortages will continue through 2022,” Gad Levanon, head of the Conference Board's Labor Market Institute, wrote in Tuesday’s report. “During that time, overall wage growth is likely to remain well above four percent. Wages for new hires, and workers in blue-collar and manual services jobs will grow faster than average.”
If you’re up for a raise next year, be sure your pay bump is enough to offset the price gains caused by inflation. While meager cost-of-living raises of 2% or 3% may have been common in the past, workers can make a good case that they need to be making at least 5% more next year just to break even.
Wages in certain industries have risen dramatically this year (hourly earnings in the leisure and hospitality industries are up 12.3% over the last year, according to the Bureau of Labor Statistics), but that’s not the case for all Americans. On the whole, real hourly wages in October were down 1.2% on a yearly basis. That means that for millions of Americans, earnings gains at work haven’t been sufficient to keep up with rising prices.