By Carmen Reinicke -
CNBC + Acorns
People who got pay raises last year may feel like their paychecks don't grow much as the economy experiences the highest rate of inflation in 40 years.
Employers struggling to retain talent amid the so-called Big Resignation were early to grant bigger pay raises and bonuses in 2021. More than half of workers received a raise last year, according to a Joblist survey of more than 2,700 employees in the US
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According to this survey, nearly 60% of those who got raises received less than a 5% raise.
Another 27% got a raise of between 5% and 10% last year.
Only 16% got a raise of 10% or more.
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However, the prices of goods and services have risen faster, meaning that
the purchasing power of most workers has been eroded.
In January, inflation shot up at the fastest annual rate since 1982,
rising 7.5% for the year,
according to data from the Bureau of Labor Statistics.
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“Inflation is something that [workers] should take into account when evaluating the current salary at their company, evaluating potential raises and considering other options,” said Kevin Harrington, CEO of Joblist.
The breakdown
Of course, the headline inflation figures do not mean that all consumers are experiencing a 7.5% price increase across the board, but rather that the government measures a basket of goods and services to gauge the cost increase.
In January, some elements drove most of the annual increase in inflation.
Gasoline was nearly 40% more expensive than 12 months ago, and energy services, including electricity and piped gas, were up more than 13.6%.
Prices for used cars and trucks are up more than 40.5% in the year, but new vehicles are also up almost 12.2%.
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Rising vehicle prices won't affect consumers who don't drive or aren't in the market for a new car, so overall they might see more moderate inflation personally.
However, the majority of citizens will be affected by the increase in costs in at least one area: the price of food, both at home and away, has increased by more than 7%.
Housing costs are also up 5.7%, which for many is their biggest monthly expense.
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What can be done
Inflation, wages and the state of the labor market at this point in the pandemic have caused millions of people to leave their jobs.
Some of them are doing it to make more money and offset some of the rising costs they're seeing.
"It's disconcerting for people to see things they're used to buying in their monthly budget go up and feel like it's something they don't have much control over," said Craig Birk, certified financial planner and chief investment officer at Personal Capital.
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Nearly 79% of workers said they thought they could make more money by changing jobs, according to the Joblist survey.
Another study by Personal Capital revealed that 77% of those who consider leaving their current job do so to find a better salary at another company.
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“Changing jobs is often a way to get an even bigger pay raise,” Harrington said, adding that workers should consider their options now if they're looking for a bigger paycheck.
What can happen in the coming months
If inflation continues to rise, that could mean those gains are further eroded.
To control rising prices, the Federal Reserve is likely to raise interest rates this year, with the first hike likely to come in March.
Still, employees may still see higher raises through 2022. This year, companies plan to give workers a median raise of 3.4%, according to a Willis Towers Watson survey.
Employees are also optimistic, even if they are not looking to change jobs.
More than half of workers said they would expect a raise in 2022 if they stay with the same company, according to the Joblist survey.
This article is part of the
Invest in You Ready series.
Set.
Grow
(Invest in you: Ready. Ready. Grow), an initiative of CNBC and Acorns, the micro-investing app.
NBC Universal and Comcast Ventures are investors in
Acorns
.
