Workers will likely find it hard to make ends meet again in 2027 because companies are planning to hold the line on pay raises for a fourth straight year, a recent survey shows.
On average, employers plan salary increases of 3.2% based on merit and total salary increases of 3.5% in 2027, according to the Mercer QuickPulse US Compensation Planning Survey of 1,001 U.S. organizations. Total salary increases include merit, promotions, cost-of-living and other adjustments. These increases are about the same as the actual increases in 2024, 2025 and 2026, the survey said.
For Americans, these relatively flat increases are making it harder to keep up with the elevated inflation of the past several years. In July, annual inflation rose 3.4%, nearly swallowing the average pay hike and potentially making it harder for Americans to get ahead.
Source attribution: This article is based on the Mercer QuickPulse US Compensation Planning Survey and comments from compensation experts cited by USA TODAY.
Why Employers Are Holding Raises Steady
“If inflation went up after wages went up, everyone would love inflation,” said Michael Ashton, managing principal at Enduring Investments LLC. “But we all know that inflation sucks, since prices go up and then, if we’re lucky, the boss will give us a cost-of-living adjustment. It does not happen proactively.”
Economic uncertainty is keeping companies sidelined when it comes to pay increases, the survey said. More than half (57%) of companies said they expected the economy to have at least a moderate impact on compensation decisions.
“Economic uncertainty is top of mind for employers this year, and compensation dollars are tight,” said Tauseef Rahman, workplace reward solutions leader for consulting firm Marsh.
What Workers Can Do
Most company budgets aren’t yet set in stone. As of July, 87% of organizations said their 2027 salary budgets were still preliminary with data collection underway, while 8% had proposed budgets to leadership and only 5% had already secured approval, the survey said.
But “if projections hold, and historically they have, this will mark four consecutive years of moderate compensation increases,” Rahman said.
Promotions and pay bumps outside the annual salary-increase cycle also are an option. Nearly 2 of 3 (64%) organizations said they have provided them or will provide them in 2027, showing compensation decisions continue beyond the annual merit cycle, the survey said.
However, the consulting firm noted that it may be harder to get a promotion next year. Employers expect to promote about 8.4% of their workforce in 2027, down slightly from 8.6% in 2026 and 9.9% in 2025, it said.
This article originally appeared on USA TODAY. Reporting by Medora Lee, USA TODAY. USA TODAY Network via Reuters Connect.
