Getting a raise at work isn't a given, especially during a pandemic and a period of economic distress. But consulting firm Willis Towers Watson has some good news in that regard.
Companies are projecting that the average salary increase in 2022 will amount to 3%, according to a recent survey. That's up from an average increase of 2.7% this year. That 3% is also what's generally considered to be a decent cost-of-living raise -- meaning, a raise not based on merit, but based on a company's goal of helping employees maintain their buying power as prices naturally rise.
At first glance, that 3% figure may seem generous, especially since it trumps 2021's average raise. But when we dig deeper, it's clear that based on economic conditions, a 3% raise might actually fall short.
Inflation is out of hand
The concept of inflation is nothing new. In time, the cost of common goods and services tends to go up.
In fact, moderate inflation can actually be a sign of a healthy economy. It's hard to justify price increases when consumer demand is low. When prices go up, it implies that demand is reasonably strong, which implies that consumers are in a strong enough financial position to be spending.
It's only when inflation starts to really exceed normal levels that it becomes a big problem. And such may be the case today.
In June, the Consumer Price Index, which measures fluctuations in the cost of common goods and services, rose 0.9%. That constituted the largest single-month increase in 13 years. It also marked an annual rise in inflation of 5.4% compared to the previous June, which, too, was the largest increase in 13 years.
Now, let's get back to that 3% raise the average worker can expect in 2022. If inflation continues at its current pace, that bump won't be enough to help employees keep up with rising living costs in the near term. That could, in turn, force a lot of people -- specifically, those without money in savings -- to rack up debt just to stay afloat and cover their basic expenses.
What's the solution? Well, if you're comfortable doing so, fight back (politely, of course). If your boss comes to you with a 3% raise for 2022, point to recent inflation data as a reason for a more generous pay bump.
And if that doesn't work, consider picking up a side hustle on top of your main job. Boosting your income by even a couple of hundred dollars a month could help you manage your rising costs and avoid landing in debt. Plus, it wouldn't hurt to have a little extra money on hand in case unplanned bills pop up or you want to add to your social calendar after months of pandemic-forced isolation.
The fact that employers are planning on raises for 2022 is a positive thing. But unfortunately, some workers may find that their pay bumps fall short. Have a backup plan in case that happens. Otherwise, you may need to prepare to cut back on expenses to avoid a pile of debt.
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