Salaries for U.S. employers could lag behind inflation in 2023, according to a new survey from Mercer. The majority (80%) of organizations are beginning to determine their 2023 annual increase budget, and overall salaries are going up. The average merit increase will be 3.8%, compared to 2022’s 3.4%, and the total increase budget will be 4.2%.
The labor shortage is the driving force behind increased compensation budgets. This is in line with long-standing practices focused on paying based on labor demand and not cost of living or inflation. Workers have seen their wage increases taken up by rising costs. The continued tight labor market could put pressure on companies to increase wages.
Financial services lead the market with a 4.0% merit increase and 4.7% total increase. The healthcare industry lags behind the market with a 3.3% merit increase and a 3.6% total increase.
Only 1 in 10 U.S. organizations said recessionary concerns have a high impact on their salary increase budgets. None of the employers surveyed are planning to freeze pay in 2023.
According to Lauren Mason, Senior Principal in Mercer’s Career practice, “Given the financial uncertainty that currently exists combined with the tight labor market, employers should consider setting flexible budgets and prioritize investments in critical and fast-moving segments, such as their hourly workforce.”