The strong labor market looks set to continue in the next year, a new report indicates. Most companies are set to deliver pay raises to their employees in 2024 amid efforts to retain talent.
That said, it's not all good news. The average raise in the US will be 3.8%, which is slightly down from the 4% raises that US employees actually did earn, on average, across 2023 so far.
It's a good sign for workers, though, as these rates of salary increase are “well above” the raises seen across the past decade. Businesses had hoped to reverse this trend, but don't seem to have found a way to do so just yet.
78% of US Organizations Say Their 2024 Salary Increase Budget Is the Same or Higher Year Over Year
The news comes from Payscale, the compensation data provider behind the Salary Budget Survey. This is their eighth installment in the annual survey, so they have a solid database of previous results to compare to managers' opinions about salary budgets in 2024.
At the very least, organizations aren't planning to reduce the annual budgets they allocate for pay raises. A high percentage of organizations in the US (79%) say they'll keep these budgets the same or will raise them in 2024. In Canada, even more organizations — 81% — say the same.
That doesn't mean that the employees getting these raises are living large, however: Thanks to a 40-year high for inflation rates, a 4% or 3.8% average raise doesn't even fully mitigate the rising cost of living expenses for many.
Will 2024 Salary Increases Exceed These Predictions?
Companies only expected to give 3.8% raises on average in 2023 when Payscale first polled them in 2022, so the actual average raise, 4%, actually exceeds expecations. That could happen again in 2024.
On the other, the prediction might be an overestimation. A recession could wind up weakening the labor market, so it's possible that the trend in higher pay could be further weakened or reversed in the upcoming year. Shifting to AI might help stave off revenue losses from labor shortages, as well.
In the end, the survey simply tells us what managers think their budgets will support in 2024 — and that's 3.8% higher wages than they thought last year.
Addressing Labor Shortages With Higher Pay
If you work in tech, you've likely been dealing with the fear of losing your position, thanks to an ongoing wave of deep job cuts across the industry, from Meta to Microsoft. But other industries may not have the same problem.
The issue brings to mind another recent survey which uncovered skills gaps for 22% (and counting) of businesses.
74% of organizations polled for this survey reported that they found it “more difficult today to attract qualified candidates.” Labor shortages were among the reasons given for the lack of skilled applicants, and it sure seems like higher wages would go a long way towards alleviating these concerns.
Other benefits can't hurt, however. If your company's budget can't handle moderate pay raises, alternative retention methods might include backing a flexible, remote-friendly work environment, or offering upskilling initiatives.