U.S. Employers Plan To Hike Pay by 3.4% in 2022 — Will It Be Enough To Offset Inflation?
Employers in the United States have once again boosted their salary increase projections for 2022 to better compete for workers in a tight labor market, but the pay hikes still might not be enough to help workers deal with rising prices.
Companies are now budgeting an overall average increase of 3.4% in 2022, up from the average 3.0% increase they had budgeted in June 2021, according to a new survey from advisory and solutions firm Willis Towers Watson. Companies gave employees an average pay increase of 2.8% in 2021.
The survey of 1,004 U.S. companies, conducted during October and November 2021, found that nearly one in three respondents (32%) raised their salary increase projections from earlier in the year. Projected raises were in the 3.2% to 3.4% range across the employment spectrum, from executives and management to support staff and manual labor.
The survey found that that following five industries should see the biggest pay hikes in 2022 compared to their 2021 increases:
- Retail and wholesale trade: 3.6% projected increase in 2022 vs. 2.8% in 2021
- Finance: 3.5% in 2022 vs. 2.7% in 2021
- Life and health insurance: 3.5% in 2022 vs. 2.7% in 2021
- Energy: 3.4% in 2022 vs. 2.6% in 2021
- Industrial manufacturing: 3.4% in 2022 vs. 2.6% in 2021
“There’s a great reprioritization of work, rewards and careers under way, and it’s putting significant pressure on compensation programs for many employers,” Catherine Hartmann, WTW’s North America Rewards practice leader, said in a press release. “As with their responses to the pandemic, employers are looking to be resilient and adaptable in their approach.”
The labor shortage — not inflation — is the primary driver of growing salary budgets, she added. This means many employers will be offering higher pay to in-demand workers like hourly employees and digital talent to help fill payrolls.
But inflation will likely be foremost in the minds of many employees, especially since inflation has been running more than twice as high as the 3.4% projected salary increase for 2022.
The annual inflation rate in the U.S. accelerated to 7% in the last month of 2021 — its highest rate since June 1982 and up from 6.8% in November, according to the Trading Economics website. Inflationary pressures “are likely to last well into the middle of 2022,” the site said.
In the absence of raises that can keep up with inflation, many workers will be looking for other benefits. Even hiring managers concede that higher pay alone won’t be enough to attract and retain workers in the current environment. The WTW survey found that many employers also plan to offer perks such as sign-on bonuses, company equity, learning and reskilling opportunities and mental well-being programs.
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