With inflation continuing its upward trajectory, employees say their salary isn't keeping up with the climb, and their financial stress is increasing, to boot.
New data from Remote.co, a remote-work resource, finds that the vast majority of employees (80 percent) say their current salary is not keeping up with inflation. The firm surveyed 1,100 global professionals between Oct. 13-30.
The finding isn't surprising: Inflation has been soaring over the past year. The Consumer Price Index (CPI)
rose 7.1 percent for the 12 months ending in November, still high but a noticeable decline from the 9.1 percent year-over-year high notched for the period ending in June.
While the rate of increase may be slowing, inflation's dramatic rise over the past year has clearly taken its toll on workers who are shelling out more for expenses, including housing, groceries, gas and medical costs.
"Inflation and concerns of a recession are greatly impacting employees' financial stress and choices both on and off of the job," said Kathy Gardner, a spokesperson for Remote.co.
Not only is inflation increasing financial stress and causing workers to be dissatisfied with their salaries, employees also say inflation and recession concerns have affected their career and financial choices, with many looking for higher-paying jobs or side gigs to earn extra cash. Nearly half (47 percent) said these concerns have pushed them to find or start looking for a higher-paying job, according to the Remote.co survey. That report also found that 45 percent were following a stricter household or personal budget, 31 percent took a side job or started freelancing, and 23 percent have allocated more money toward savings or an emergency fund.
"For HR professionals already challenged with navigating a tight labor market amid a shifting global economy, the large-scale possibility of career changes may be particularly concerning," Gardner said.
Employers have been increasing salaries more than usual as a result of inflation and the employee-driven job market. Consulting firm WTW, for instance, found that
U.S. employers plan to boost salaries an average of 4.6 percent in 2023, up from 4.2 percent this year. Other reports find that salaries are increasing: A report from Salary.com, which surveyed 1,000 HR professionals, found that nearly half of U.S. employers plan higher year-over-year budget increases next year compared to 2022. And consulting firm Gartner found that 63 percent of executives plan to make compensation adjustments in response to high inflation.
Real average hourly earnings for all employees increased 0.5 percent from October to November, seasonally adjusted, the BLS reported Dec. 13, but dropped 1.9 percent year over year.
Even so, for many employees, salaries—even with projected hikes—are trailing cost of living, making the increases feel like they aren't going far enough. Employers understand that high inflation effectively lowers purchasing power and devalues salaries, explained Amy Stewart, associate director of content marketing at Payscale, a Seattle-based compensation software firm.
However, "raising wages to meet inflation can cause pricing [for consumer products and services] to go up to offset the cost, which perpetuates a vicious cycle," she noted.
While experts say employers would be wise to look at salaries, as well as to consider offering bonuses and other monetary support to help combat employees' concerns over inflation, there are other steps that can be taken.
For one, to make sure they are paying workers fairly, employers should do a market analysis for their jobs, Stewart said. Some positions may see pay increases above the inflation rate due to increased market competitiveness, while others may see more-modest increases to reward employees "on merit" to encourage them to stay with the organization. Organizations also shouldn't overlook the importance of pay communications.
Gardner said building a healthy company culture and putting forth strong retention efforts to keep top talent—such as paying fairly, offering flexibility like remote-work options, promoting from within, providing competitive benefits, offering career development opportunities and creating a feedback loop for workers—can all help retain employees amid volatile times. Financial wellness benefits and support also are in demand right now as employees deal with increasing costs.
"With this pressure top of mind for so many workers, it's an excellent time for HR teams and leaders to remind and reassure employees about the value they bring to their organization, especially if you're operating in a fully remote or hybrid workplace," Gardner said. "Beyond providing financial wellness support, bonuses and pay, and cost-of-living increases, [it's important to] show appreciation, lead with empathy and recognize employee efforts from all levels. These small and intentional practices can help workers feel more secure in their career choices, foster greater engagement and create long-term employee loyalty."