Oct 12, 2023 - Economy

Brace yourself for lower raises next year

Emily Peck

Illustration of a hand in a suit handing out a tiny dollar — Illustration: Sarah Grillo/Axios

There are early signs that companies are planning smaller raises for their employees in 2024.

Why it matters: This is obviously less than great news for workers, but it's another sign that inflation is cooling and the dreaded wage-price spiral didn't materialize as some had feared.

Driving the news: U.S. employers are increasing their compensation budgets by 3.5% for merit raises next year and 3.9% for all wage increases, according to a recent survey from Mercer. That's down from 3.8% and 4.1% in actual increases in 2023.

Yes, but: Most companies won't finalize their budgets until December, Mercer points out.

State of play: Wage growth is still well above where it was pre-pandemic, but it's trending down.

In September, average hourly earnings were up 4.2% year-over-year, according to the Bureau of Labor Statistics. In March 2022, that number was at 6%.

Of note: Raises are certainly lower for Social Security recipients next year — the cost of living adjustment is expected to be around 3%, as Axios' Neil Irwin wrote Wednesday. That's down from an eye-popping 8.7% in 2022.

We'll learn the official COLA number Thursday — and the latest on inflation — after the Consumer Price Index numbers come out at 8:30 a.m. ET.

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Brace yourself for lower raises next year

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