How Much is the Average Raise in America?
Most employees are curious about how the pay raise they get measures up to the average. They want to know what they can do to earn more. There are many factors to consider that impact an employee’s salary increases.
Your occupation, the industry you work in, the type of raise you’re entitled to receive, and whether you are getting a promotion or changing jobs all can make a difference.
Once you’re aware of what you could expect from a raise, you can successfully position yourself to get an above-average one.
Determining How a Raise Measures Up to the Average
What’s the best way to tell if your pay raise is above – or below – average? Consider general factors that are related to the economy, your occupation, and the industry you work in:
- Overall growth in earnings and in the economy will impact the resources that organizations have available for raises.
- Industries that experience faster growth and are adding a high volume of workers will often offer higher raises to attract and retain the employees needed to support that growth.
- Occupations with a shortage of workers with the right skills and training are also more likely to offer higher than average salaries and salary increases.
- The industries with slow growth or job losses and wage stagnation are less likely to offer higher earnings, both in salary and pay increases.
Pay Raises by the Numbers
The Bureau of Labor Statistics (BLS) issues an Employment Cost Index that measures the year-over-year increase in wages and salaries. The BLS October 2018 report indicated that wages and salaries increased by 2.9 percent for the 12-month period ending in September 2018. Wages for private industry workers increased by 3.1 percent and for government workers increased by 2.5 percent.
These figures include all types of raises and don’t imply that every worker had their pay increase by 3.1 percent in the private sector. Organizations with compensation systems tilted towards merit-based pay increases will show a greater variation in pay increases by the employee.
Occupations with the Highest and Lowest Increases
The BLS figures revealed the greatest growth in the following Occupational/Industry groups:
- Sales 4.0%
- Leisure and Hospitality 3.8%
- Service Occupations 3.8%
- Transportation/Material Moving 3.7%
- Retail Trade 3.6%
- Office and Administrative Support 3.5%
The lowest wage growth was seen in:
- Educational Services 2.5%
- Insurance 2.4%
- Real Estate 2.3%
- Hospitals 2.2%
- Aircraft Manufacturing 1.9%
- Natural Resources, Construction, and Maintenance 1.6%
Types of Pay Raises
Also look at the type of raise you expect to receive. Raises take several different forms. Across-the-board or cost-of-living raises are awarded at the same level to all employees. Merit increases are distributed differentially based on performance. Promotion-based increases are allocated to employees who have advanced to new, more responsible jobs. Equity raises are instituted by organizations to ensure equal pay for equal work.
The Mercer Compensation Planning Survey indicates that employers are projecting their average total increase to salary budgets (which includes merit and promotional budgets) to be 3.4 percent, up slightly from 3.2 percent, which was anticipated 6 months ago. Notably, these changes were reflected in promotional increases, since merit increase budget projections remained the same at 2.9 percent. Among employers who projected higher budgets, 31 percent cited “greater competition for workforce or anticipated labor shortages” as the primary reason for change, followed by “change in base salary structure or competitive positioning to market” (26 percent) and “business performance stronger than expected” (14 percent).
Performance-Based Pay Increases
The WorldatWork Salary Budget Survey as reported by the Society for Human Resource Management (SHRM) illustrates the impact that performance has on raises. Merit-based pay increases for 2018 are expected to average:
- 2.8% for middle performers (69% of workers)
- 4.1% for high performers (25% of workers)
- 0.6% for low performance (6% of workers)
The report showed very little variation in raises by location. The average increase for all states this year was either 2.9 percent or 3 percent, except for California, where the average salary budget increase was 3.1 percent.
The only major metropolitan area to register below the 3 percent national average for salary budget growth this year was Detroit, where salary budgets grew by 2.9 percent. In terms of cities, the highest average salary budget increases were on the West coast, with 3.3 percent growth in San Francisco, San Jose, and Seattle—all cities driven by high-tech and minimum-wage increases.
A Promotion Often Means a Bigger Raise
WorldatWork reported that more employees are progressing in their careers, according to the results of the survey, with an average of 8.6 percent of employees receiving promotions in 2017 compared to 7.9 percent in 2016. Raises associated with those promotions are being reported as higher than they have been in the past (mean: 8.7 percent in 2017, 8.4 percent in 2016).
The tightening job market and the heightened interest in promotions by millennials have contributed to this trend.
Changing Jobs Boosts Your Pay
Job switchers earned wage growth well above the average as reported by SHRM according to the Workforce Vitality Report by ADP. The report indicates the following major differences between overall wage growth and job switchers’ wage growth in key industries:
- Information technology: overall wage growth 5.5%, job switchers’ wage growth 9.4%
- Construction: overall wage growth 2.0%, job switchers’ wage growth 7.1%
- Trade, transportation, and utilities: overall wage growth 3.1%, job switchers’ wage growth 3.4%
- Manufacturing: overall wage growth 2.7%, job switchers’ wage growth 4.9%
- Finance and real estate: overall wage growth 2.5%, job switchers’ wage growth 9.4%
- Education and health services: overall wage growth 2.9%, job switchers’ wage growth 1.2%
- Professional and business services: overall wage growth 3.4%, job switchers’ wage growth 9.1%
The Best Ways to Position Yourself for an Above-Average Raise
What’s the best way to line up the best possible pay raise you can get? It’s important to show your employer that you’re a valuable employee and should be paid as such. It’s also important to be prepared to move on because that can be your best opportunity to increase your earnings.
- Identify the bottom line for your department and the area or areas where the most value can be added and appreciated by your supervisor and management.
- Work with your supervisor to develop a performance plan and tie your goals to the bottom line whenever possible. If your organization doesn’t have a structure for performance plans, volunteer to draft one for review by your supervisor.
- Communicate your weekly and monthly progress towards goals to your supervisor whether requested or not. When it comes time to determine merit raises, your boss will have plenty of detailed information about your contributions.
- Develop and follow through on a professional development plan that incorporates cutting-edge knowledge and skills in your area. You will be prepared to make a stronger contribution to your current employer and change jobs if necessary. Pay special attention to upgrading your technology skills.
- Identify next-level positions at your organization and volunteer to take on any related tasks. Promotions are one of the best ways to get a large salary increase from your current employer.
- Keep your professional network current and take on roles in your field such as leadership in professional organizations and conference presentations that will enhance your visibility and attract recruiters.
- Take the time to enhance your marketability to prospective employers while you’re still at your current job.
- Keep a constant eye out for openings in your field since job switching is the most common way to generate a big increase in income. An easy way to do that is to set up job search alerts. In addition to getting new listings as soon as they are posted, if the employer lists a salary you can see what you could be earning if you made a change. Also, check salary surveys and calculators to estimate what someone with your credentials can expect to be paid.