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Is the 4% raise the new normal?

Summary

This article looks at the median raise rate of 4% that has stayed consistent for the third year in a row. The worker shortage brought on by the pandemic has caused companies to raise compensation budgets in order to retain talent. Experts say raises are slower to change in tune with current economic conditions, and may stick around for the foreseeable future. Companies should be strategic when planning compensation, examining who is being paid what in order to attract and retain workers. Factors like interest rates, inflation, and the upcoming presidential election may also affect raise rates in 2024.

Q&As

What is the median raise rate for the third consecutive year?
The median raise rate for the third consecutive year is 4%.

What factors are contributing to the 4% median raise rate?
Factors contributing to the 4% median raise rate include the worker shortage brought on by the pandemic, the low unemployment rate, and the lack of legal permanent and temporary immigration.

What should companies consider when planning compensation?
Companies should consider who is being paid what, what they need to be paid to stay and attract more workers, and performance when planning compensation.

What factors will affect median raise rates in 2024?
Factors that will affect median raise rates in 2024 include any Federal Reserve moves on interest rates, any changes in inflation, and the looming U.S. presidential election.

How is automation impacting the worker shortage?
Automation has not yet been able to make a dent in the worker shortage.

AI Comments

👍 This article provides great insight into why 4% raises are sticking, and how employers can plan for future compensation.

👎 This article does not provide much detail on how employers can decide whether or not to give raises to their employees.

AI Discussion

Me: It's discussing how median raises are sticking high at 4% for the third year in a row. The article talks about how the worker shortage brought on by the pandemic hasn't fully gone away and that's why compensation is still high. It also examines why 4% is sticking, and what employers should know for compensation planning.

Friend: Wow, that's really interesting! It sounds like employers have to be especially mindful of compensation planning due to the pandemic and the worker shortage. This could have a big impact on their budgets and their ability to offer raises.

Me: Exactly. The article also mentions that while the 4% number may go down in the future, it's likely to stay high for the foreseeable future. This could be a problem for employers who are trying to stay competitive in the job market.

Action items

Technical terms

Worker shortage
A situation in which there are not enough workers available to fill the available jobs.
Great Recession
A period of economic decline that began in late 2007 and lasted until mid-2009.
Median raises
The average amount of money given to employees in the form of a raise.
Compensation
Payment or reward given in exchange for services rendered or goods supplied.
War for talent
A phrase used to describe the competition between employers to attract and retain the best employees.
Unemployment
The number of people who are out of work and actively looking for a job.
Elastic
Able to change in response to changes in the environment.
Compensation budget
The amount of money allocated to pay employees.
Lump sum
A single payment of money, rather than a series of payments.
Federal Reserve
The central banking system of the United States.
Inflation
A sustained increase in the general level of prices for goods and services.

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