The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Approaching your manager for a raise can be nerve-wracking even if your company had a profitable year. With a recession possible this year or next, financial uncertainty may discourage you from bringing up compensation to your manager at all.
However, because inflation makes the cost of living more expensive, not receiving a raise has the same effect as your salary decreasing. Proportionally lower salaries, rising interest rates and a possible recession in 2023 or 2024 may make it harder for people to afford their normal standard of living. This is harming individual financial outlooks: In December 2022, 27 percent of those who didn’t expect their personal finances to improve in 2023 cited stagnant wages or reduced income as the reason why, according to Bankrate.
Regardless of a company’s financial position, it’s important employees feel empowered to ask for a fair wage for their work. Here are average raise statistics for this year and how to ask for a raise, even if your company is tightening its belt ahead of recession fears.
Key insights on asking for a pay raise in an uncertain economy
- Workers are due for a raise. 52% of employed Americans didn’t receive a raise between August 2021 and August 2022. (Bankrate)
- Most Americans are not confident financially. 66% of Americans do not expect their personal finances to improve in 2023. (Bankrate)
- Workers want a raise this year. 47% of workers say they’re likely to ask for a raise at work in the next 12 months. (Bankrate)
- Employers will prioritize retaining employees. 49% of organizations say compensation and retention will be a higher priority investment in 2023. (Payscale)
- More than half of employees can expect to get a raise this year. 56% of organizations will give pay raises over 3% in 2023. 25% of workers will receive a pay raise of less than 3%, 39% of workers will receive a pay raise between 3% and 4%, 26% of workers will receive a pay raise between 4% and 5% and 11% will receive a pay raise of more than 5%. (Payscale)
Average pay raises in 2023
A U.S. worker’s real (or adjusted for inflation) average weekly earnings is $378.46, or $10.97 in real average hourly earnings, according to February 2023 data from the Bureau of Labor Statistics (BLS). That’s 1.3 percent less than in February 2022, when workers made a real average weekly pay of $385.64.
High interest, inflation and stagnant wages can make it harder for the average employee to afford the essentials. It can also make it harder to save in case their company lays off employees. Workers want to change that: 47 percent of workers are likely to ask for a raise at work in the next 12 months, according to Bankrate. Some (18 percent) workers already asked for a raise in the last 12 months.
What we’ve learned throughout the continued boom-and-bust cycle of the U.S. economy is that a job market that keeps steadily chugging along is often better than one that runs red-hot for a short period of time — and then crashes just as quickly because of inflation and the higher rates meant to tame it. A strong, sustainable labor market is like a tide that lifts all boats.— Sarah Foster, U.S. Economy Reporter
However, employees will, on average, see a pay raise this year. Both non-exempt (hourly) and exempt (salaried) employees in all industries can expect to see an average pay increase of 3.8 percent this year, according to the 2022-2023 Payscale Salary Budget Survey, which surveys employers. That’s slightly higher than the raises employers gave in 2022: an average of 3.5 percent for non-exempt employees, and 3.6 percent for exempt employees.
Managers can expect to see an average raise of 3.8 percent in 2023, according to Payscale, up from an average of 3.6 percent in 2022.
Science and engineering employers are expected to give the largest raises of any industry in 2023, according to Bankrate’s analysis of Payscale data:
- 4.7% average raise for non-exempt employees
- 4.2% average raise for exempt employees
- 4.6% average raise for managers
Education employers are expected to give the smallest raises in 2023, according to Bankrate’s analysis:
- 2.5% average raise for non-exempt employees
- 2.7% average raise for exempt employees
- 2.5% average raise for managers
Who received pay raises in 2022?
Those employees who received pay raises in 2022 most commonly received them for performance, according to Bankrate:
Note: Percentages represent workers who received raises over the past 12 months, as of August 2022.
Over one-third (36 percent) of workers who received a raise in the past 12 months received it based on performance. An additional 31 percent of workers received their recent raise as a cost of living increase.
Only millennial workers (ages 26-41) who received a raise in the past 12 months were more likely to have received a cost of living raise (33 percent) than another type of pay increase. Younger generations who received a raise in the past 12 months were also far more likely to receive pay raises due to a promotion or new job responsibilities: 26 percent of Gen Z (ages 18-25) and 24 percent of millennials, compared to 11 percent of Gen Xers (ages 42-57) and 5 percent of baby boomers (ages 59-77).
How a possible recession in 2023 could impact compensation
A more competitive labor market and fears of a recession mean fewer companies expect to give raises than in 2022, according to Payscale’s 2023 Compensation Best Practices Report.
“Nothing better illustrates how beneficial tight labor markets can be for workers than the so-called ‘Great Resignation,’’’ Bankrate U.S. Economy Reporter Sarah Foster said. “When the job market is tight, employees have more bargaining power to negotiate for higher pay, better working conditions and even more flexibility. They look for new positions and often job hop, a process that recently has resulted in even bigger pay gains.”
On the flip side, Foster said, in a tougher labor market, companies no longer need to boost wages, because workers no longer have that bargaining power.
This year, 80 percent of companies plan on giving base pay increases, according to Payscale. Another 15 percent are unsure whether they will give base pay increases or not, and 5 percent said they will not give base pay increases. In 2022, 87 percent of companies reported they would give base pay increases and only 3 percent were unsure.
Those companies that plan on giving pay increases are giving their employees larger raises than last year: 56 percent of companies are giving a base pay raise of more than 3 percent, compared to only 53 percent of companies in 2022, according to Payscale.
Many companies have a lower salary budget in 2023 than initially planned
Three-quarters (75 percent) of organizations say their economic concerns have led to a lower salary budget for 2023 than they initially planned, according to Payscale. Other concerns include change in compensation philosophy (24 percent), reduced competition for labor or a labor supply surplus (17 percent) or because the prior year’s salary increases were higher than usual (17 percent).
In order to retain workers, more than half (58 percent) of employers will increase base pay for at least some of their employees based on the impact of inflation on wages:
|Are you addressing the impact of inflation on wages by increasing base pay to retain workers?||Percentage|
|Yes, for all workers||40%|
|Yes, for lower-wage workers only||18%|
|No, we are not adjusting base pay||21%|
Nearly a quarter (21 percent) of employers are not adjusting base pay based on inflation in 2023, while 18 percent are only adjusting base pay for lower-wage workers. Rising inflation especially impacts lower-wage workers’ competition for labor, and some companies will adjust only their wages.
Many companies are adjusting wages for inflation through bonuses or stipends: 27 percent of employers will give bonuses to all workers to address the impact of inflation on wages and 24 percent of employers are giving stipends or allowances to all workers, according to Payscale.
When’s the best time to ask for a raise?
If your company is giving raises in 2023, the best time to ask for a raise is now — even if your company’s leadership says they’re worried about the economy.
Jasmine Escalera, a career and confidence coach who specializes in helping women of color, says it’s never a bad time to ask for a raise.
“I know that it’s a hard time and I know that there’s a lot going on, for people and for companies. But if you want to enjoy your career…never put your needs aside, ever,” Escalera told Bankrate. “Even if it’s just about starting the conversation and continuing it until the appropriate time is available for all parties, really have the conversation.”
You’re likely not alone in wanting to speak up about compensation at your workplace. More than half (60 percent) of full-time employees only feel somewhat valued at work or not at all valued, according to Workhuman’s December 2022 Human Workplace Index.
3 steps on asking for a pay raise in an unsteady market
1. Employers use data – you should, too.
Escalera recommends bringing evidence of the goals and targets you hit recently to your manager when you ask for a raise. If your company has laid workers off and you’ve taken on additional duties, or duties above your pay grade, she suggests tracking those extra responsibilities and bringing them to your manager as evidence you should receive a raise.
2. Be open to feedback.
If your manager hasn’t already given you feedback on your work outside of performance reviews, ask for it. Feedback is meant to help you grow in your role, so take it with an open mind and ask for actionable steps you can take in time for your next discussion.
3. A “no” is not a no forever.
If your employer denies your request for a raise, don’t give up. Take the feedback you received and use it as steps to improve in a set time. Escalera recommends establishing a timeframe to circle back with your manager to discuss compensation again.
Bankrate.com commissioned YouGov Plc to conduct the survey on 2023 finances. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,656 U.S. adults. Fieldwork was undertaken on November 15-18, 2022. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on pay raises. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,458 adults. Fieldwork was undertaken between August 17-19, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on job seekers. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,417 adults, among whom 1,524 were either employed or looking for work. Fieldwork was undertaken on March 8-10, 2023. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.