Dive Brief:
- Despite “nominal” wage increases, Americans’ spending power fell in most of the largest metropolitan statistical areas, an analysis released Tuesday by the Ludwig Institute for Shared Economic Prosperity (LISEP), a nonprofit research organization, found.
- Among the 56 largest MSAs, spending power decreased for middle- and lower-income households in 61% of markets in 2024, which is the most recent year that complete localized data was available, per the research.
- Housing, childcare and healthcare were the top drivers of cost increases, the research found, backing up numerous other reports of skyrocketing costs.
Dive Insight:
The cost of living increased 4.7% in 2024, compared to the average annual increase of 3.2% seen since 2005, the LISEP report found. Childcare costs rose an average of 7.6%, and healthcare costs climbed 2.9%.
“This analysis reminds us that rising wages, by themselves, don’t tell us whether people are actually better off,” LISEP Chair Gene Ludwig said in a statement. “What matters is whether incomes are keeping pace with the cost of living.”
Employers expect to set base salary merit increases at 3.2% and total salary increases, (including merit, promotions, cost-of-living adjustments) at 3.5% in 2027, an August report by professional services firm Marsh found. If realized, that would mark four straight years of moderate compensation increases, a U.S. workforce reward solutions leader for Marsh said at the time.
Meanwhile, 83% of employers said healthcare cost spikes compel them to make tradeoffs with wage and salary increases, and 93% expect to shift costs to workers, according to a recent report by the National Alliance of Healthcare Purchaser Coalitions.
At the same time, more than 4 in 10 workers said they thought they were more likely to get a raise by leaving and rejoining their company than by staying — up from 18% in 2024, a September Marsh report showed.
Ultimately, employees want protection against “unanticipated costs,” namely medical costs, and would value benefits focused on financial security and stability, per an August report from research and consulting firm Gartner.