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Workers are pointing to high inflation as they demand larger raises

Higher prices have eaten into income, so many employees are taking that math to their bosses and demanding better pay

A help wanted sign on a job board ahead of the Valentine's Day holiday at the Southern California Flower Market in Los Angeles, Calif. (Patrick T. Fallon/AFP/Getty Images)
9 min

Naomi Lawrence-Reid had had enough this winter. A contract pediatrician in Southern California, her day rate had stayed the same for more than 2½ years, through a pandemic that saw her industry decimated by illness and burnout. She had asked for a raise last year, only to be turned down.

She then watched as the next few months were marked by a drumbeat of news about inflation — how it was growing, year over year, ticking up from 6.2 percent in October to 7.5 percent in January, a 40-year high.

So she went back to the staffing company that employed her and made another pitch for a raise. This time she cited inflation, and told them she’d stop working for them if they said no. They upped her 24-hour rate, from $1,500 to $2,000.

“I had an excellent track record for patient satisfaction and patient outcomes. The nurses and staff really liked me and I enjoyed working with them — and there was a 7 percent rate of inflation,” she said. “And quite frankly, physician salaries and physician compensation historically does not reflect the rates of inflation. So at that point in January, I think stating all of those terms, in addition to the mini strike that I staged, my increased rate was approved.”

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Across the country, millions of Americans are grappling with the realization that their paychecks are worth less than they were a year ago, sometimes by a wide amount. Prices of groceries (up 7 percent), cars (12 to 40 percent), gas (40 percent), rent (14 percent), and just about everything have gone up. The increased costs are wiping out the substantial gains that workers have made in pay over the last year. So many of them are making a logical conclusion — their paychecks should increase, too. And some, like Lawrence-Reid, are asking for raises because of it.

Labor experts and economists said workers asking for inflation-related raises marks the latest example of how the pandemic has altered the labor market. Many workers have emerged with newfound leverage and become emboldened to seek more from their companies during a trying time.

“I don’t think there’s any question that workers are very sensitive to the level of their wages, particularly in an environment where inflation has been burgeoning and obviously has been sustained,” said Mark Hamrick, a senior analyst at the firm Bankrate.

Hamrick connected the phenomenon to the record levels of workers switching jobs, a trend that picked up markedly in the second half of 2021. Employers in many fields struggled to fill a record number of open positions, as workers selectively found better opportunities.

“Some people aren’t waiting around to wait to see what kind of wage increases they might be getting, whether it’s an annual evaluation or a merit pay increase,” he said. “And that’s why obviously we’ve seen a high level of quits too. And I would expect that to continue for the foreseeable future.”

Changing jobs is typically the most effective way to get a significant wage increase. According to a recent survey from ZIpRecruiter, about two-thirds of recent hires got raises when they started new jobs. About half of those received raises greater than 10 percent.

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Many labor unions have brought inflation into their contract negotiations this year, like the Minneapolis Federation of Teachers, which is asking for substantial raises after years of getting 2 percent or less in contracts with the city.

Greta Callahan, the union’s president, declined to give more specifics but said rising prices from inflation was part of the union’s demand. Support professionals like special education assistants and bus aides are asking that their salary floor be increased nearly 50 percent, from $24,000 to $35,000 a year after losing ground to other districts and industries in recent years, Callahan said. Some groups of teachers have asked for 20 percent raises. Inflation is exacerbating long-standing workplace issues, such as low wages and questions about access to mental health resources, Callahan said.

“Inflation didn’t create all these problems, but it will make our solutions all expensive,” she said.

Data on raise requests nationally is hard to come by.

Pay for nonmanagement production workers is up 6.9 percent year over year, according to data from the Department of Labor, a trend that has largely resulted from companies competing with each other for workers amid a scarcity, but could also be affected by raises. And there are signs that companies are thinking hard about compensation as they work to attract workers, too.

According to a survey of 5,000 companies done by compensation analysis company Payscale, 92 percent of companies gave pay increases in 2022, up 7 percent from 2021 and 25 percent from the rocky 2020. Some 44 percent of companies are giving pay increases that are higher than 3 percent — an increase of 13 percentage points over averages from the last six years. The vast majority — 85 percent — said they were worried about inflation eroding the value of wage increases. Still, there are signs that the raises are stopping a bit short of compensating for all of the higher prices.

“Unfortunately raises aren’t matching what the inflation is,” said Victoria Neal, an expert at the Society for Human Resource Management. “There’s a bit of that mismatch. The larger employers have the funding and they can say we’ll do what we need to do to keep our employees and make them happy. And other smaller and midsized companies are constrained by their sizes.”

Not all workers are getting the raises they’re asking for.

One 27-year-old from Central Florida, who works at a security firm and spoke on the condition of anonymity because he was not authorized to speak publicly about his work, went back to his boss after getting a 2.6 percent raise to ask for more.

“I said, ‘Is this adjusted for inflation?’ She looked at me and kind of laughed,” he said. “I said, 'I’m serious. I’m losing money this year based on inflation, and this raise is not making up for everything going up right now.’ ”

He said that his boss told him that she understood but couldn’t do anything about it: Her salary had not gone up to match inflation, either.

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Other companies are giving out larger raises this year preemptively, to try to get ahead of the issue.

Adriano Tawin, 33, works for a real estate development company in Brooklyn that has done well recently, he said. This year the company gave Tawin a 5 percent raise — up from 3 percent the year before, and the highest he’d seen in four years working at the company. Still, he said he planned to ask for an increase when he returns from a trip visiting family overseas, saying it was only fair the company match inflation if it was on strong footing financially.

Jack Kelly, a veteran recruiter and the CEO of the executive search firm Compliance Search Group, said that wage increases were just one of many sweeteners that hungry firms were offering. Also on the rise were perks like a four-day workweek — offered by some 11 percent of companies in Payscale’s survey — remote work, flexible schedules, free college tuition and other benefits.

“At least in this point in time, it really is a good time for workers, white collar and blue collar alike,” he said.

Some workers are also paying attention to how well some companies have done recently, raising prices to match inflation and pulling in record profits.

One worker at Trane Technologies, a transnational manufacturing company, said she was frustrated the company gave her only a 4 percent raise this year, despite record profits. The raise was more than in previous years, but still well under 7.5 percent inflation and less than the 6 percent for which she had asked.

The increase is eaten up entirely by rising prices in her life; it takes more than two-thirds of it just to cover the $100-a-month increase in rent she’s paying this year, she said.

Mostly, she felt the percentage was out of step with all the cheery news about the company’s financial successes. The news of the raise came with a letter from the company thanking its employees for their part in its “record” revenue and profitability in 2021.

She also noted the company’s decision this year to buy back some $3 billion in stock from investors and increase the dividend rate given to investors by 14 percent.

“It really was a slap in the face to, at the same time, be handed one piece of paper saying how much money the company has right now and how they hit record profit margins,” she said. “And then at the same time, being handed another piece of paper telling me that my wage increase isn’t even going to be on pace with inflation.”

She said she plans to go back to managers to ask for more but is not sure if they’ll budge.

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The company said in a statement that it used many determinations to calculate raises, including inflation, other economic trends, the specifics of local markets and comparisons to similar work.

“Trane Technologies is proud that our strong compensation and benefits packages, combined with our uplifting and purpose-driven culture have enabled us to maintain employee engagement scores near the top-quartile of all companies,” it said. “When it comes to individual compensation and merit adjustments, we take all these variables into consideration as well as the individual’s role, responsibilities and performance.”