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Pay Expectations, Trends, and Raises

Employees today have drastically different financial needs than their predecessors. The basic financial needs remain the same – providing for food, shelter, and clothing – but factors such as advancing technology and increasing cost of living mean today’s employees expect much higher salaries than those in the past. 

It wasn’t long ago that mobile phones were considered a luxury. Today, these costly devices are considered essential, despite a price tag of about $1,000. But mobile phones are far from the only thing increasing the cost of living. Safety and fuel efficiency mean cars are more expensive. Inflation causes food to cost more. More jobs require expensive college degrees. Life today costs more than it did in the past.

Employee Needs and Expectations

In order to afford the changes in today’s cost of living, many employees are taking on second jobs and side hustles to make ends meet. According to the Bureau of Labor Statistics, more than 8 million Americans work multiple jobs. Because of the high demands of a two-job lifestyle, employees are starting to demand higher wages from the start. 

While new employees’ pursuit of higher wages might put a strain on employers, the changes these employees are making can improve the workplace and bolster the economy. Linkedin says, “Around here, Gen Z’s hunger for higher pay deserves respect.” According to recent studies, US graduates prioritize stability and salary over factors such as a known brand. In other words, little-known brands aren’t necessarily at a disadvantage as long as they can provide competitive wages.

Trends in Pay and Raises

Because employees are struggling to make ends meet, their higher salary demands are weighing on employers. SHRM reports 60% of employers are experiencing worker shortages and are struggling to attract and retain talent. Additionally, 55% of businesses indicate compensation is one of the biggest challenges of 2023, second only to recruitment.

But there is a tool that may help employers struggling to make pay increases: pay transparency. Roughly twice as many organizations are starting to include pay ranges in job postings this year. And thanks to pressure from social media, many are talking more openly about pay. Payscale reports, “How people feel about the pay process at their workplace – whether they understand the ‘how’ and ‘why’ of pay – has 5 times as much impact on their satisfaction with their employer vs. how much they are paid. When employees have all the information, they feel valued and respected by their organization; feeling valued can trump incremental pay raises.” 

The Generation Most Likely to Ask

Not all employees share the same level of satisfaction (or dissatisfaction) about their pay. While differences such as industry and gender affect level of satisfaction, it’s age that has the biggest correlation. Reports show Gen Z employees are the most likely to ask for a raise in the coming months. A recent article by the BBC shares a number of factors that influence this trend. “Many of these young workers graduated into the workforce or were in their very first roles during the Covid-19 pandemic. Along with being professionally stunted and unable to climb the salary ladder, they also became susceptible to layoffs.” 

Because of this, Gen Z employees are starting to ask for higher wages for entry-level jobs. SHRM reports workers with a college degree expect to earn nearly six-figure salaries in a new job. While that may seem extreme, researcher Corey Seemiller explains why these workers are so starved for income. “At Gen Z’s age, older people worked 40 hours a week, and made enough money to buy a house and have barbecues on the weekend. Gen Z works 50 hours a week at their jobs, and another 20 hours a week side hustling, yet still make barely enough to cover rent.” 

But despite the struggles of their employees, not all employers are considering increasing salaries. SHRM states, “We are seeing a bit of a mismatch between employer plans and employee expectations. With inflation waning and the labor market cooling compared to the last few years, some employers want to start reining in pay increases. On the other hand, employee paychecks are simply not going as far, as food, housing and health care costs have not abated.” The solution is for employers to ensure wages are fair and competitive, and make up the difference with benefits. Remote work can help alleviate childcare costs. Health incentives can reduce medical care costs. Financial education can reduce financial stress. Benefits that support employee needs can alleviate the financial burden caused by today’s high cost of living.

Conclusion

Employers who want to take advantage of rising talent need to ensure wages are fair and competitive, and offer benefits that alleviate financial strain on employees. In a time when multiple jobs are the norm, employees are starting to expect higher wages and open communication from the start.

Find out how 101 Financial’s Workplace Wellness program helps alleviate financial strain on employees.