Dive Brief:
- U.S. employers are planning for 3.5% raises in 2025, according to Payscale’s most recent salary budget survey.
- The anticipated salary increase rates vary by industry, Payscale found. On the upper end, government, and engineering and science workers will see raises above 4.5% and 4.2%, respectively. Meanwhile, retail, customer service and education workers can expect raises of just 3.1%, Payscale said.
- “Given the stabilization of inflation and the easing of labor market conditions, we’re seeing a slight reduction in planned salary increases for 2025, though figures are still above the 3% pre-pandemic baseline that employees have come to expect,” said Ruth Thomas, chief of research and insights at Payscale, in a statement.
Dive Insight:
The projection follows a pattern of “softening in a cooler labor market,” Payscale said. Actual salary increase rates were 4% in 2023 and 3.6% this year.
Despite the softening, as Thomas pointed out, pay increase rates remain high in the context of recent history; 2023 was considered a banner year, with firm WTW noting in 2022 that the 4.1% projection at that time was the highest planned increase since 2008.
WTW’s projections and actual data vary slightly from Payscale’s and tend to provide higher numbers — with the former projecting a 3.9% increase in 2025 — potentially a result of different employer samples or differences in calculating averages. Both report a similar compensation trend, however.
For most employees, the notion of historically high pay increases may be cold comfort. Payscale’s Real Wage Index puts the numbers in a context that may feel more accurate for workers. “Since 2006, wages have risen 33.1 percent overall in the U.S. But when you factor in inflation, ‘real wages’ have actually fallen 12.6 percent,” Payscale noted alongside its index. “In other words, the income for a typical worker today buys them less than it did in 2006.”
Employee sentiment reflects that real wage data, surveys have shown; for example, more than half of respondents to a January survey from the American Staffing Association and Harris Poll said their paycheck had not been keeping up with inflation.