Federal Reserve officials hope that a significant increase in average salary will moderate and restrain inflation. They plan to pause their aggressive increase in interest rates. However, most economists forecast the strategy might result in a recession this year.
Payscale, a compensation research and software firm, conducted its annual Compensation Best Practices Report. The result showed that 80% of employers plan to increase base pay in 2023, albeit in a smaller amount.
Recent survey results showed an increase in wage growth, albeit in an incremental amount. (Photo: Perkbox)
Pay Raise in 2023
In 2019, the pay increases averaged about 3%, but the wage growth significantly decreased during the pandemic. According to the Labor Department’s employment cost index, there was a 5.1% decrease in annual wage growth.
Meanwhile, survey results by another research firm, WTW, estimated that the average salary in 2023 will increase to 4.6%.
The Payscale survey also showed that 56% of the companies plan to increase by more than 3%. And some firms plan to increase by more than 5%. It means the average increase rate ranges from 4% to 5%.
Amy Stewart, an associate director of content for Payscale, said some employees might not felt the pay increase due to economic concerns or their company’s had higher increases in previous years.
Is the Job Market Still Hot?
According to USA Today, the surging inflation in America has led to massive layoffs in some companies. However, the labor market is still hot as most companies struggle to find workers since many older Americans retired early during the pandemic.
Fed Chair Jerome Powell expressed his support for increasing pay rates to a smaller amount. He said moderating wage growth in service industries is key to curbing inflation over the long term. The surging inflation has affected the companies paying higher expenses, including rents and labor costs, which they often pass to consumers through higher prices.
