Average Pay Rate Expected To Climb In 2024

According to this recent article from Bizwomen, US companies are anticipating that they will be offering a 3.8% pay increase on average in 2024.

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This projected figure of 3.8% represents a slight decrease relative to the 4% average pay increase registered in 2023 so far. That said, 3.8% was also the projected pay increase for 2023 at the outset of the year, but the labor-favoring job market and competition for talent among companies has led to larger pay increases than were previously anticipated.

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In total, while nearly 8 out of 10 (78%) employers are expecting their budgeted salaries to increase or remain essentially unchanged through 2024, the remaining 22% of employers are planning to decrease their salaries next year, which is more than double the proportion of employers who anticipated decreasing salaries in 2023 (9%).

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Among companies that are increasing their salary budgets, nearly 2 out of 3 (65%) list the competitive labor market as their motivation for upping employee pay, although many of these businesses are expecting to issue smaller pay increases than in 2023. In fact, the outsized raise in 2023 is part of the justification many of these companies are citing to employees to explain the smaller pay bump planned for next year, alongside concerns about economic downturn on the horizon. 

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In light of inflation forecasts and demand persistently outpacing supply for a number of specialized skills in the labor market, many experts predict that average annual pay increases will likely remain between 3.5% and 4% in general for the foreseeable future, which is a higher range than was common prior to the onset of the pandemic. That said, with the job market finally softening a bit, employees are also becoming more wary of imbalance in pay relative to the value of their skills and contributions as it pertains to job security, which helps keep the range of average pay increases from over-inflating further. For example, median wage growth in the Spring of 2023 was at 5.6%, down from the year before when it peaked at 6.7%, which is a good sign for those rooting for wages to grow at a more moderate pace despite the fact that median wage growth is still significantly higher than the 3% to 4% median growth registered before the pandemic.

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The number of job openings has become relatively stable at about 9.6 million as of June 2023, and with layoffs holding steady and the number of job quitters dropping, it appears that the job market may have hit an equilibrium in line with the “soft landing” for which the Federal Reserve has been aiming with its rate hiking campaign, which is great news for employers and employees alike. Accordingly, the number of economists and forecasters predicting recession in the next year has dropped considerably, and most of those who are still calling for an economic downturn of some sort now forecast a shorter duration and less severity.

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In sum, there are a lot of indicators suggesting that the current wage stability may be sustainable, which combined with stabilizing prices and an inflation rate that is now lower than historical averages, adds up to greatly reduced risk of a wage and price spiral. While workers finding new jobs can still expect a bump in their pay rate, that bump is considerably smaller than it was just last year, and the job market and pay increases seem like they may be relaxing into a new normal. 

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You can read more about this topic here.