Modest pay hikes next year could leave some workers lagging inflation
Employers are likely to offer limited salary increases in 2027 amid ongoing economic uncertainty, according to a survey of 1,000 businesses.
In 2027, employers are expected to give workers only moderate raises, according to a new estimate from Marsh, a professional services company. The average salary increase is forecast to be 3.5%, encompassing merit raises, cost-of-living adjustments, promotions, and other pay hikes. This represents a notable shift from the record-breaking salary increases seen in 2023, which have since cooled, according to Marsh compensation specialist Mark Bowling, who shared these insights with CBS News.
Bowling suggests that the current landscape may signal a new standard for what companies are prepared to allocate for salary increases.
Despite the moderate outlook, the potential for modest pay hikes could still fall short of keeping pace with inflation. Consumer prices surged by 3.4% annually in July, though economists anticipate inflation to ease this year and in 2027. This scenario could leave certain employees struggling to keep up with rising costs. Bowling emphasizes that businesses are grappling with the challenge of allocating their limited compensation budgets, particularly in an environment marked by economic uncertainty.
Many employers are opting to concentrate raises on top performers, a strategy known as "sweetening the comp" for high achievers, rather than distributing them evenly across their workforce—a practice referred to as "peanut-butter raises."
Interestingly, the survey conducted by Marsh indicates that workers in high-tech sectors and banking industries might see slightly higher salary increases compared to their counterparts in the retail sector. For instance, the average projected raise among high-tech companies stands at 3.8%, while banking employees could anticipate an average increase of 3.7%.
Conversely, employees in industries facing dwindling job opportunities might wind up with smaller raises that fail to keep pace with inflation. Bowling concludes by stating that "There are going to be folks who aren't keeping up with inflation."
Written by urgent.news from CBS News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
