Last year, workers received larger raises, but these increases may not keep up with inflation.

Last year's raise recipients may not experience a significant increase in their paycheck's purchasing power.

The worst inflation in 40 years is making it difficult for employees to receive pay increases.

In an effort to retain talent during the Great Resignation, employers are expected to offer larger pay increases and bonuses in 2021. A Joblist survey of over 2,700 U.S. employees revealed that more than half of workers received a raise last year.

According to the survey, nearly 60% of those who received raises saw a less than 5% increase, while 27% saw a 5% to 10% increase. Only 16% received a raise of 10% or more.

These companies have difficult-to-find remote work jobs.

The erosion of workers' earning power is due to the faster increase in the prices of goods and services, as evidenced by the 7% annual inflation rate recorded in December 2021, according to the U.S. Bureau of Labor Statistics.

Workers should be aware of inflation when assessing their current pay, considering raises, and exploring other options, as advised by Kevin Harrington, CEO of Joblist.

The breakdown

The government measures a basket of goods and services to gauge rising costs, not all consumers are being hit with 7% higher prices across the board.

Inflation in December was driven by several factors, including a 49.9% increase in gasoline prices and a 10.1% increase in energy services, including electricity and piped gas. The prices of used cars and trucks increased by 37.3% on the year, while new vehicles saw an increase of 11.9%.

Although rising vehicle prices won't affect non-driving or non-car-buying consumers, most Americans will still experience inflation in various areas, such as food (up more than 6%) and housing (up more than 4%), which is a significant expense for many.

What can be done

The pandemic has led to millions of people leaving their jobs due to inflation, pay, and labor market conditions. Some of them are doing so to increase their income and cover the rising costs they are experiencing.

Seeing things that are typically within one's monthly budget increase and feeling powerless over it is unsettling for people, according to Craig Birk, a certified financial planner and chief investment officer at Personal Capital.

A Joblist survey revealed that nearly 79% of workers believe they could earn more money by changing jobs, while a Personal Capital study found that 77% of those considering leaving their current jobs are doing so for better pay at another company.

Harrington advised workers seeking higher pay to consider job switching as a way to achieve a larger pay increase.

Going forward

If inflation remains high, it may reduce the effectiveness of raises. The Federal Reserve is likely to increase interest rates this year, with the first hike possibly occurring in March, in order to control rising prices.

According to a survey from Willis Towers Watson, companies are planning to give an average 3.4% raise to workers this year.

According to the Joblist survey, more than half of workers expect a raise in 2022 if they remain with their current company, despite not actively seeking a new job.

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