Carmen Reinicke -
CNB + Acorns
Workers in the United States wonder how rising inflation can affect their pay.
Inflation has risen more than expected.
In October, consumer prices rose 0.9% and raised the year-on-year increase to 6.2%, reaching the highest level in the last 30 years, according to data from the US Bureau of Labor Statistics.
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It was the second month in a row that inflation was higher than economists expected.
The consumer price index increased in September by 0.4% in the month and by 5.4% in the year.
This report has led to a 5.9% increase in the cost of living for Social Security recipients, the largest increase in 40 years.
So if you don't get a 6.2% pay raise this year, is that technically a cut?
Not necessarily, according to some financial experts.
“It is much more nuanced than that.
It depends on your shopping basket as a consumer, ”advanced AnnElizabeth Konkel, an economist at Indeed Hiring Lab.
Not necessarily a pay cut
Although inflation has risen, the consumer price index takes into account a number of things, some of which have contributed more to rising costs than others.
"For most people, the prices of the things they have to pay are going up, but these impacts are quite varied across the board," said Mark Hamrick, senior economic analyst at Bankrate.
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Energy costs in October contributed greatly to the overall increase.
Energy was up 4.8% from the previous month, and gasoline soared 6.2%.
Food was up 0.9%, and food delivery was up 1%.
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The increases are even more staggering in the year.
Energy prices have risen 30% in the last 12 months, and gasoline almost 50% in the same period.
Used car prices rose 2.5% in October, more than 26% from a year ago.
Due to these pockets of inflation, most consumers will not see their individual expenses rise 5.4%.
If you do not plan to buy a car, for example, or do not take any trips that are affected by the increase in fuel prices, you will not be affected by the areas of higher inflation.
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"Not everyone flew a plane or bought a used car" in the last year, said Brett Ryan, senior US economist at Deutsche Bank.
"The data does not tell each person's personal story," added Bankrate's Hamrick.
Who are the most affected by inflation?
That doesn't mean that people don't feel the impact of rising prices on their budgets.
And some people will be hit harder by inflation than others, generally those with the lowest incomes and therefore the most vulnerable to rising prices.
"Inflation really weighs on those at the lower end of the income spectrum," Ryan explained, adding that energy prices end up being one of the hardest to deal with.
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"That is an area where it is more difficult to make a quick purchase adjustment," he said. per gallon, ”he recalled.
Businesses are also being hit by rising costs, which may mean that wages are not keeping up with inflation this year.
The average salary increase budgeted in the United States for 2021 is 3%, according to data from The Conference Board.
The group also projected that cash for raises will be around 3% in 2022, as well.
"Companies that look at their budgets realize that [the increases] are probably not going to meet inflation," said John Dooney, a human resources manager at the Society for Human Resource Management.
"But what we see is more strategies around really rewarding high achievers."
How to ask for a raise
Although prices are higher due to inflation, experts do not advise using it as a reason to ask for a raise in work.
"I suspect that would lead to a complicated discussion with the head of Human Resources, because someone in that position might say, 'We are also experiencing a price increase," argued Konkel, adding that people should probably leave inflation out of the box. any discussion about wages or raises.
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Instead, take the time to evaluate and reflect on what you've accomplished in your role.
If you have been in the position for more than a year, have assumed more responsibilities or have exceeded your performance, it is information that you should raise with your boss or take to the performance review, if you have it at the end of the year.
According to Dooney, high achievers will find it easier to ask for more money, and companies may be more willing to award one-off bonuses to reward employees.
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Also, experts don't recommend that workers necessarily leave their jobs if they don't get raises to offset inflation right now.
Economists do not expect current volatility to be persistent and expect prices to stabilize as the economy continues to recover.
"My expectation is that these things will solve themselves," Konkel said.
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