Here's why you may get a smaller pay raise next year
Many workers will see their annual raise shrink next year as the job market continues to cool from its torrid pace in the pandemic era.
The typical worker will get a 4.1% pay raise for 2025, down from 4.5% this year, according to a new poll by WTW, a consulting firm.
This is a midyear estimate from 1,888 U.S. organizations that use a fiscal calendar year. Actual raises may change by year-end when the companies finalize their salary budgets.
The size of workers' salary increases is «driven primarily» by the supply and demand of labor, said Lori Wisper, WTW's work and rewards global solutions leader. Affordability and industry dynamics play lesser roles, she added.
Companies in the survey would likely pay their annual raises by April 1, 2025, she said.
Worker pay in 2021 and 2022 grew at its fastest pace in well over a decade amid an «unbelievably robust» job market, Wisper said.
Demand for workers hit records as Covid-19 vaccines rolled out and the U.S. economy reopened broadly. Workers quit their jobs readily for better, higher-paying ones, a trend dubbed the great resignation. More than 50 million people quit in 2022, a record.
Companies had to raise salaries more than usual to compete for scarce talent and retain employees.
The prevalence of incentives like signing bonuses also «grew dramatically,» said Julia Pollak, chief economist at ZipRecruiter.
Almost 7% of online job listings offered a signing bonus in 2021, roughly double the pre-pandemic share, according to ZipRecruiter data. The percentage has dropped to 3.8% in 2024.
«I'm not sure I'll ever see that kind of job market in my lifetime again,» Wisper said of 2021 and 2022.
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