Your Cost of Living Raise Could Be a Pay Cut

When it’s time for a raise, it’s common practice for your boss to give you what they call a “cost of living increase” instead of anything sizable. But is that small percentage really enough to match your growing financial responsibilities right now?

Here’s Five Fast Facts on Cost of Living Increases:

1. 📈 Cost of What? - In theory, it’s supposed to be based on the increase of the standard cost of living each year. That includes everything from the cost of housing, taxes, and even your food. Really, though, there’s no official metric. 
2. 💵 What’s Common? - For reference, the national average for raises in 2022 was around 5%. 
3. 💡 Actual Number - At this point, you’d need at least a 7.1% increase in order to keep up with inflation. So if you get a 4.5% raise this year, you’ve lost money.
4. 📉 New Math - Here’s the weird thing: salaries as a whole have increased about 5% year over year, but hourly earnings have dropped by 1.9%. Your salary may be higher on paper, but it buys you less.
5. 🍽️ Waiting - There’s one segment that’s actually seen salary increases that outpace inflation: leisure and hospitality workers. They’re up 4.3% over 2021. I wonder how much of that has to do with tips?  

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🔥Bottom line: When it comes down to it, good employers will have to raise wages, provide better benefits, and rethink how they operate on a number of fronts. Things like remote or hybrid work, better health insurance, four-day work weeks, or even subsidies for things like child care. They need to figure out something --and figure it out fast -- or they’ll have another Great Resignation on their hands. 

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What do you think? Did you get a raise this year?

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