Here's Why You're Probably Not Getting a Raise Next Year
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Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition. This is Your Money Matters from The Wall Street Journal.
Welcome to Your Money Matters. I'm J.R. Whalen in New York. The U.S. economy continues to expand, the Labor Department reporting a pace of 3% annual growth for the second quarter. But don't expect that to translate to a salary increase next year. The Wall Street Journal's John Simons has some answers here for us. So, John, this would seem kind of counterintuitive. We have very low unemployment and fierce competition for talent, yet companies are holding back on raises?
Yeah.
Yeah, that's right. In their sort of budgeting for this year and for next year, companies are kind of signaling that they're a little sort of hesitant and that they're worried about uncertainty on a lot of fronts across the global economy. And what that means is that they are budgeting for about a 3% increase in raises across the board for people. And that kind of covers roughly, you know, the cost of living increases and sort of keeping up with inflation. And they're also a lot of companies are planning to make their their benchmarks for for bonuses a lot tougher. They're sort of, you know, just just clamping down on on some of these budgets and and making it harder to get bonuses, essentially.
So it'll be a little bit more selective based on performance?
That's right.
Now, this is really the first time since the recession that we've seen companies a little unclear and unsure about their future. Because since the recession, we've seen corporate America experience pretty much rapid growth.
That's right. And the people at Aon Hewitt who put together this report and who have done this for about 41 years, surveying companies about how they plan to pay workers, they say that companies are signaling, like I said, uncertainty here. and that they're uncertain about their own performance also, not just what's going on, you know, around the world and some of the political uncertainty here in the U.S., but they're concerned about their own performance in the coming year.
We're speaking with The Wall Street Journal's John Simons about why we may not expect to get raises in our paychecks next year. And you're listening to Your Money Matters here at The Wall Street Journal. Thanks for listening, everyone. So the idea here of companies being more selective with raises based on performance, that is also being used, it says in your story, as a message to employees that they can improve their performance.
That's right. I mean, what companies are doing is they're saying, look, we want to make sure there's one company I talked to in specific for the piece that said, you know, we want to make sure that people don't
Why might economic growth not lead to raises next year?
come to expect these merit increases every year. So we're basically changing the system a little bit to make it clear that you need to perform well, you need to outperform your peers in order to get these appreciable increases in your pay.
Seems like kind of a tightrope for companies. It's understandable what they're doing. But at the same time, there is a lot of competition out there for talent and talent within a company's own ranks who might be looking elsewhere.
Yeah, it's really curious. Usually at this point, you know, economists will say when unemployment gets below 5 percent, around 4.5, you know, in the areas that we've been hovering for the last maybe five or six months. economists will say that wages start to tick upwards. But everyone I talk to for the story, all the experts say that this is really a sort of disconnect between what's happening at companies and what's happening out in the world in terms of the tightness in the labor pool.
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