Skip to main content

At many US companies this year, big battles may be brewing over pay. The good news: For the first time in a long time, workers may actually have the upper hand. In keeping with a decade-long trend, American employers are planning to increase average salaries by about 3% heading into 2022, according to two recent reports.

The Social Security Administration has made cost-of-living adjustments (COLAs) to benefits since 1975, based on a measure of CPI for urban wage earners and clerical workers. In the past decade, COLAs have averaged 1.65%, or about half of the reported salary increases in that time. 

While COLA doesn’t drive how most employers design their pay systems, Americans are feeling the pinch of higher prices for basic necessities like rent, food, and gas, notes Bill Dixon, managing director with Pearl Meyer, a compensation consulting company. “Any salary increase in that 3% range is causing you to fall behind in terms of inflation.”

Companies that opt for a status quo salary bump also may underestimate the reality of the labor market: Employees currently enjoy the most bargaining power they’ve had in at least 20 years, Dixon estimates. Thanks to a global labor shortage and a lot of job turnover, employees have options.

“The environment is quite unique for negotiating your salary increase,” Dixon says. “If your employer is not willing to entertain those conversations, that might be a reason to reassess your gratitude.”

Persistent and extensive labor shortages caused by increased turnover, early retirements, childcare needs, challenges in negotiating job offers, and enhanced unemployment benefits, means many employers are finding it difficult to fill open positions for a wide range of roles—contributing to higher wages.

These dynamics make for an employee’s market, and such cycles typically last about two to three years, Dixon says. So, it’s especially important to capitalize on the opportunity to push for a higher raise while you’re in the driver’s seat, he adds.

At Pearl Meyer, we work with boards and organizations to design and implement compensation and leadership strategies that build great management teams.
Find out how we can help you.
Get in touch with us