Even if you’ve experienced a raise in the past year, inflation means you probably won’t feel it. According to the price trend in 2023, the situation next year can be similar to this year.
The hot labor market in the past year has given office workers the upper hand in salary negotiations. Too many job openings and too few candidates are driving U.S. wages to their fastest rate of rise in decades.
But with inflation hitting a 40-year high earlier this year, the pay rise may not make much sense. A Bankrate survey in September found that more than half of U.S. office workers who had received a raise in the past year said their income had not outperformed inflation, and now even corporate chief financial officers (CFOs) are Acknowledge that inflation has far outpaced wage increases this year.
The survey of chief financial officers released Wednesday found that overall wage adjustments have been two percentage points below inflation this year. The study was conducted Dec. 2 by the Richmond and Atlanta Feds and Duke University’s Fuqua School of Business.
The study found that most U.S. treasurers “said wages at their companies were not keeping up with inflation.” While wages for American office workers have risen by record amounts over the past year, the purchasing power of workers has declined.
“Our findings suggest that firms have raised wages much more recently than they usually do. However, in many cases, wage increases have remained lower than increases seen in observed price statistics,” the authors write.
Additionally, many were “generally pessimistic” about the economic outlook for next year. Inflation and labor availability were seen as top concerns among CFOs, ranking even higher than Fed rate hikes and overall economic health.
CFOs predict that inflation will fall to a certain extent next year, but it will not return to levels close to those before the epidemic. To compensate for changes in consumer prices, CFOs plan to raise salaries by an average of 3.3 percent in 2023, but even that is struggling to keep pace with inflation, the survey found.
salary increase lag
A 3.3% wage increase is unlikely to keep pace with inflation if inflation remains close to current levels, as some economists predict.
In November, the year-on-year inflation rate was 7.1%. That’s a welcome figure as it’s down from a peak of 9.1% in June, but bringing inflation down to pre-pandemic levels of 2% is likely to be a long haul, and some experts worry that it won’t be long before it can. Inflation is likely to remain at disturbingly high levels for the foreseeable future.
“If inflation stays around 4% we could have a problem,” Mohammad El-Erian, dean of Queens’ College at the University of Cambridge, told CNBC this week. The supply chain problems that are holding back global economic growth are unlikely to be resolved in the short term, and will continue to push up prices for at least the next year.
El-Erian warned last summer that there was an extremely high risk of inflation turning into “stubborn hyperinflation,” which occurs when inflation is forecast to keep rising and keep prices uncomfortably high for longer. kind of situation.
The Federal Reserve’s CFO survey found that nearly 60% of companies adjust wages due to inflation plans, but unless inflation falls sharply next year, Americans’ purchasing power will be further weakened.
In addition to adjusting for inflation, some companies plan to increase performance pay, where employees have a more optimistic outlook for the next year. The survey found that next year, the average salary increase for office workers who receive both salary adjustments will reach 6.4%.
But the survey found that 2023 could be as tough as this year for workers not entitled to merit-based pay raises.
“The raises for many, if not most, office workers will not be enough to offset the impact of recent inflation,” the authors said.
Translated by: Liu Jinlong
Reviewer: Wang Hao
Even if you received a raise sometime in the past year, inflation meant you probably didn’t feel it. And depending on the direction prices take in 2023, next year might be more of the same.
The red-hot labor market of the past year has put workers in the driver’s seat when it comes to wage negotiations. Too few candidates for too many job openings has pushed US wages to grow at their fastest pace in decades.
But that didn’t mean much when inflation hit a 40-year high earlier this year. More than half of US workers who received a raise in the past year say their income hasn’t kept pace with inflation, according to a September Bankrate survey , and now even company CFOs are admitting that inflation has run ahead of raises this year.
Total wage adjustments this year averaged two percentage points below inflation, a survey of chief financial executives published Wednesday found. The study was conducted by the Federal Reserve banks of Richmond and Atlanta and Duke University’s Fuqua School of Business and concluded on Dec. 2
The study found that the majority of US financial executives “report that wages at their firms have not kept pace with inflation.” Despite raising wages at a record rate last year, employees’ purchasing power was diminished regardless.
“Our results suggest that firms’ most recent compensation increases are well above what they typically offer. However, in many circumstances, they remain below growth in observed price statistics,” the authors wrote.
Additionally, many are “generally pessimistic” when it comes to next year’s economic outlook. Along with labor availability, inflation ranks as the top concern for CFOs, even outranking interest rate hikes by the Federal Reserve and the economy’s overall health.
CFOs expect inflation to subside somewhat next year but not to anywhere near pre-pandemic levels. To compensate for changes to consumer prices, CFOs plan to increase wages by an average of 3.3% in 2023, the survey found, but even these raises could still struggle to keep up with inflation.
Lagging raises
Raises to the tune of 3.3% are unlikely to keep pace with inflation if it stays close to current levels, as some economists have predicted.
Year-over-year inflation in November came in at 7.1%. It was a welcome despite from its 9.1% peak in June, but bringing inflation back to its pre-pandemic rate of 2% could be a long slog, and some experts are Concerned inflation could become stuck at uncomfortably high levels for the foreseeable future.
“We may have an issue where inflation gets stuck at around 4%,” Mohamed El-Erian, president of Queens’ College at the University of Cambridge, told CNBC this week. El-Erian said the supply-chain issues that have constrained the The global economy throughout the pandemic are unlikely to be resolved in the short term, and could continue to push prices higher for the next year at least.
El-Erian warned last summer that inflation is running a very real risk of becoming “sticky” and “entrenched,” which happens when people expect inflation to continue increasing and prices stay uncomfortably high for longer.
Nearly 60% of companies are planning on adjusting wages owing to inflation, the Fed’s CFO survey found, but unless inflation goes into a steep decline next year, Americans are likely to see their purchasing power eroded even more.
For companies that provide a merit-based wage bump in addition to inflation adjustments, the outlook is rosier for US employees. Workers who receive both adjustments will be on average entitled to a 6.4% raise next year, the survey found.
But for most employees not entitled to merit-based wage increases, 2023 is likely to be just as difficult as this year, the survey found.
“Many, if not most, workers will not see wage increases make up for the recent inflation,” the authors wrote.
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