Economy

Wage growth still isn’t enough to fight persistent inflation

Employees want salary increases, but if your company doesn’t have the coffers to fund them, HR has to get creative.
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In a new economic reality, HR teams are facing the dual challenge of prepping for a potential recession while also meeting the inflationary moment as employees continue to ask for wage increases.

Employers’ total average salary budget increased 4.1% in 2022, The Conference Board reported in September. The total salary increase budget for 2023 is projected to reach 4.3%.

Workers are experiencing strong wage growth, and a 4% raise is considerably high during recessionary times. The problem is that it won’t do much to help employees tackle the increased cost of food, energy, and housing due to prolonged inflation.

The Bureau of Labor Statistics reported that the Consumer Price Index rose 7.7% in October compared to the year prior. Inflation—though down from a 9.1% peak in June—means that workers, even with healthy raises, will essentially feel a pay cut at the end of the month.

Some companies are making efforts to ease cost-of-living issues for workers, as CBS reported in July during peak inflation woes. T. Rowe Price offered a 4% raise to most of its staff this summer. Microsoft doubled its budget for merit-based raises.

Earlier this month, HR Brew asked readers if their organizations have tried to raise wages with inflation. Some 51% said they weren’t even going to try, 31% said they were but it was a losing battle, and 18% said they were able to do so successfully.

Those in the former two camps should take a page out of UKG’s playbook. Pat Wadors, the HR tech company’s chief people officer, told HR Brew in October that it was looking to increase its pool for merit-based raises, in addition to redesigning its benefits program to provide financial support based on employees’ needs, rather than “disperate allowances.”

“I want people to feel cared for in [an] inflationary time,” Wadors said. “We’re striving to encourage our employees to be more aware of our benefits.”

As HR Brew reported earlier in the year, subsidizing employee expenses like childcare or student loan repayments can also retain employees and help them make ends meet.—AD

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HR is challenging. HR news doesn’t have to be.

HR Brew keeps you effective in the fast-changing business environment.