Through 2023 so far, salaries in the US have increased by an average of 4.4%, which is the fastest growth rate that’s been recorded in more than 20 years.
While projections show that rate slowing somewhat to 3.8% in 2024, it is worth noting that same rate forecast of 3.8% was originally projected for 2023 before the expectation-defying job market remained hotter for longer than had been anticipated and led companies to increase compensation accordingly.
How closely will 2024 mimic 2023 remains to be seen, of course, but it is already becoming clear that employees and employers will likely be going into the year with very different expectations about how negotiations will play out on the compensation front.
Not surprisingly given the labor-favoring market dynamics of late, employees are expecting raises, with nearly 2 out of 3 workers planning to ask for a raise at some point during the next year.
In justifying their pay-bump requests, the most commonly claimed reason was inflation, which was cited by nearly 4 in 10 respondents, while a little less than 1 in 6 respondents simply felt underpaid and a little more than 1 in 4 believed they had earned their to-be-proposed raises as a result of having taken on additional responsibility.
Further raising the stakes of these negotiations, almost 1 out of 3 workers claim that they will pursue employment elsewhere if they do not receive the raise they seek.
Employers have a considerably different perspective on the wage negotiation environment, and are viewing 2024 as a potential opportunity to counterbalance some of the abnormally-sized wage growth and bonus levels that employers relied upon through the pandemic and economic dip/rebound in order to attract talent under abnormal circumstances.
From the perspective of many employers, those raises and bonuses represent anomalies that must be accounted for, corrected, and absorbed in subsequent years as they attempt to find the ideal equilibrium between employee satisfaction and profitability, whereas to employees those raises and salaries have formed new baseline expectations.
Ultimately, however, just as the realities of the market led to significantly higher salaries and bonuses than had been forecast for 2023, the forecasts for 2024 will be just as susceptible to market-shifting forces, which will have more influence in the matter than either employer or employee expectations will.
About half of all US companies intend to introduce new benefits and perks (46%) and increase starting salaries (51%) in the next year, which reflects in part the uncertainty about whether the job market will continue to soften in the coming year or whether the market dynamics will continue to favor employees.
Regardless of what the market does within the expected range, however, some potential strategies to consider in order to improve your company’s attraction and retention prospects in 2024 include:
You can read more about pay raises and benefit forecasts for 2024 and how to manage them here.
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