Biggest wage increases in 15 years are ready for 2023. But that will not compensate for inflation

These 4.1% are less than half of the total inflation rate. The consumer price index, which tracks the prices people pay for goods and services, showed that prices rose 9.1% year-on-year in June – a 40-year high. So for workers who get a wage increase next year of 4.1% or less, they will actually experience their wage reduction because their purchasing power will be reduced. (Conversely, in recent years, when inflation was below 3%, workers had a higher purchasing power if their wage increases reached 3%).

Yet many employees could see their wage increases keep pace with or even top inflation when other types of compensation – such as spot or retention bonuses – are added on top of their increase in base pay.

Due to the tight labor market, companies offer a variety of financial incentives to attract and retain workers.

Who exactly will see their pay rise more than average? Like wage increases this year, which averaged 4%, “[the money] will not be spread like peanut butter. … It’s going to be very targeted, “said John Bremen, CEO of Willis Towers Watson.

Thus, Bremen means that most of the money will go to those who fill the roles or demographic groups that are most in demand in a company. It can range from hourly-paid, beginners to highly-educated jobs such as software engineering or nursing for Gen Xere between the ages of 45 and 54, whose numbers are slimmer than Baby Boomers and Millennials.

“Jobs that are highly concentrated in these populations can see wages rise disproportionately. It is [often] difficult to attract and retain people in these groups, “Bremen said.

And that may be true even if there is a recession and the number of layoffs is rising. Why? For today’s tight labor market is not a temporary thing. While exacerbated by the pandemic, it was expected for years thanks to expected demographic shifts – such as fewer young workers entering the labor market and low levels of immigration.

“I have slides from 2013 that show labor shortages in 2021,” Bremen said.

Inflation encourages record declines in workers' wages and benefits

So it is reasonable to expect that employers will still have to pony up in both financial and non-financial ways to staff their activities adequately and remain competitive.

For example, more than a third (36%) of respondents in the Willis Towers Watson survey said they plan to increase how often they raise wages, with a majority saying they plan to do so twice a year.

A large majority (69%) said they have increased flexibility for teleworking. And almost 60% place more emphasis on increasing diversity, equality and inclusion.

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