Many workers are feeling the pinch as their purchasing power has shrunk in the face of inflation.
More than half of workers – 56% – say they have not gotten a raise or found a better-paying job in 2021, according to a new Bankrate survey. That's compared with 50% in 2019 and 62% in 2018. Fifty-two percent of workers say they're earning about the same pay as they were pre-pandemic.
Since June 2021, inflation on a 12-month basis has increased at a record pace of 5.4%, the highest since August 2008, according to Bureau of Labor Statistics data. The price of many essentials have gone up over the past 12 months, including food consumed at home up 4.5%, clothing up 3.4%, and gas up 42.1%. Average hourly earnings rose 4.6% year over year in September, according to BLS.
“Purchasing power, that’s really the name of the game. Just like net pay is really what matters, not gross pay,” said Greg McBride, Bankrate’s chief financial analyst. “When you’ve got a limited number of dollars, it just puts the squeeze on the discretionary spending. People pouring more and more of that pay into the essentials and there’s less left over for disposable.”
Nearly 44% of workers got a raise or a promotion in 2021, according to Bankrate. Among those who received a pay bump, 24% of workers said it was due to a raise at their current job, while 16% switched to a better-paying position with another employer.
Millennials have been leading the way in earning more pay through job hopping, said McBride.
“Millennials [are] about five times as likely as baby boomers to switch jobs and that’s where we noticed...among lower- and middle-income households, the likelihood of getting a pay increase came from those that switched jobs,” he said. “It was the higher-income households that were more likely to see a pay increase at their current job.”
Among workers who switched jobs and secured higher pay, 25% of them made $30,000 to $49,000 annually, 29% earned $50,000 to $74,999 a year, and 13% made $75,000 or more, according to the survey.
Being on the higher end of the income spectrum increased workers’ likelihood of getting a raise with their current employer. Over the past 12 months, 39% of workers making over $75,000 annually got a raise, compared to 29% earning $50,000 to $74,999, and 25% making $30,000 to $49,000. Only 9% of workers earning less than $30,000 a year received a raise.
The most common reason for raises were performance-based pay increases, followed by raises for rising living costs, and promotions or new job responsibilities.
“If your current employer isn’t in a position to pay you what the market will bear, you can be a free agent,” said McBride. “A lot of competition [in the labor market], other employers looking to hire as well.”
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