Wages Aren’t Keeping Up With Inflation

By: Anneken Tappe · October 31, 2023 · Reading Time: 2 minutes

Shrinking Salaries

If you were hoping for a big pay bump next year, you might not be in luck. Employers are planning to increase salaries on average by a smaller amount next year than they did in 2023.

Major job boards such as ZipRecruiter (ZIP), and Indeed (RCRRF), foresee a slowdown in wage growth for posted jobs too.

This comes at an inopportune time for many Americans, as the cost of living seems to only be going up.

Wage Growth Data

In 2023, the average salary increased by 4.4%, according to consulting firm Willis Towers Watson (WTW). But for next year, it’s forecast to grow just 4%. That doesn’t sound like a big difference, but don’t forget that we’re talking in averages here.

Indeed’s wage forecaster also showed that year-over-year growth in posted wages is trending downward. In August 2023, wage growth was 4.5%, still up from pre-pandemic rates, but down from a high of 9.3% in January 2022.

The Race Against Inflation

So what if wages grow a little bit slower after the pandemic-era jobs bonanza? Enter inflation.

Inflation has outpaced wage growth since 2021. Since the start of 2020, the cost of living rose 18.3%, compared to a 17.6% increase for wages. This has resulted in negative nominal wage growth for the average American. In other words, your paycheck simply isn’t going as far.

With wage growth set to continue slowing in 2024, Americans will need to be extra careful not to overspend their budget.

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