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Get Ready for That Whopping 3 Percent Raise Next Year

We’ve come a long way as a nation since the Great Recession, but despite the economy doing better, real wages still seem to be lagging. In fact, it’s estimated that workers will see a meager 3 percent raise in 2017, the same as in 2016.
The good news is: The U.S. is not in a terrible recession anymore. The bad news is: It sure doesn't feel like it, much of the time. Click To Tweet

The last recession officially ended in June, 2009. The unemployment rate is down to 4.9 percent (from a peak of 10 percent during the recession) and some 14 million jobs have been added to the private sector since then. However, looks can be deceiving when it comes to the economy.

3 percent raise
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WorldatWork, a non-profit for human resources management professionals and business leaders, released the findings from its 2016-2017 Salary Budget Survey, in which 5,759 members were asked “how much they are planning on increasing base pay throughout their organizations in the upcoming year,” reports the Society for Human Resources Management (SHRM). The survey found that organizations plan to offer a 3 percent raise next year across all employment categories (nonexempt hourly, nonexempt salaried, exempt, and executive).

SHRM also highlighted The Conference Board’s U.S. salary increase budget forecast for 2017: “US salary increase budgets for 2016 have a median increase of 3.00 percent, the same percentage as the previous six years. Projections for 2017 are also 3.00 percent.” The ERI Economic Research Institute published its salary increase forecast for 2017 and predicted the same 3 percent increase, too — and the study also estimates that the unemployment rate will drop to 4.8 percent next year.

Do You Know What You're Worth?

Not all employees will receive the 3 percent median raise in 2017, indicates Tom McMullen, Hay Group’s North American Total Rewards Expertise Leader (SHRM).

“Organizations at the 90th percentile consistently indicate a 3.5 percent increase budget across all employee groups,” says McMullen, “while the 10th percentile is showing 2 percent across all groups.” He goes on to say, “We typically see top performers in organizations receiving between 1.5X and 2X the median salary increase for employees,” therefore “top performing individuals could expect to receive salary increases upwards of 6 to 8 percent.”

Still, PayScale’s Real Wage Index found that wages have risen roughly 9.5 percent since 2006, which seems incredible at first glance. However, when inflation is factored in, “real wages” are actually down 7.4 percent. The PayScale Index forecasts a 1.6 percent year-over-year U.S. wage growth in the third quarter of 2016, but a decrease of 0.3 percent compared to the previous quarter.

Hopefully, the labor market will continue to tighten so that employer confidence will increase and thus drive up wages to a level that is more reflective of a recovered economy.

Want to see how your pay stacks up against others in your field? Take PayScale’s Salary Survey, and generate a free salary report.

Tell Us What You Think

How does a 3 percent raise sound to you next year? Share your thoughts of the projections and join the conversation happening on Twitter. Feel free to leave your two cents below in the comments section, too.

Leah Arnold-Smeets
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