Inflation is a top concern for many Americans, and experts say it might be time to bring it up to negotiate a raise.
The consumer price index, a broad-based measure of prices for goods and services, increased to 8.3% in April and remains at a nearly 40-year high, according to the Bureau of Labor Statistics. That means, despite average hourly earnings being up 5.5% in the last year, real earnings have dropped 2.6%.
At the same time, the job market is seeing a record level of openings, turnover and new hires, giving workers more leverage.
Discussing inflation in the same breath as worker pay is “unavoidable,” says Andrew Flowers, a labor economist at Appcast and research director at Recruitonomics, and employers “need to address it in a realistic way” through appropriate cost-of-living raises or broader merit increases.
Without them, Flowers predicts inflation could drive the next quitting wave, where workers see that the only way to snag an inflation-busting pay raise is to negotiate one at a new job.
The numbers bear this out, says ADP chief economist Nela Richardson. In the first quarter of 2022, job-switchers saw their pay grow by 8.7% year-over-year, while wages for job-holders went up by 6%, according to ADP data.
With nearly two job openings for every person who wants one, Richardson says companies are doing more to hold on to good employees. Some are walking back previous plans to deny inflation-adjusted pay: While Google said in December it wouldn’t give raises to match inflation, the company announced last week it was streamlining its reviews and promotions processes, which would result in higher salaries for more employees.
Replacing unhappy workers is also expensive, Richardson adds. “If inflation and cost-of-living concerns aren’t a compelling argument for wage growth, loyalty in the labor market and good performance can be,” she says.
On May 4, the Federal Reserve raised its benchmark interest rate by half a percentage point in an effort to curb inflation. If all goes according to plan, Richardson says, we’ll see a deceleration in inflation in the next six to nine months. What that means for workers: “You may want to ask sooner rather than later.”
If anything, inflation news gives you a good reason, timing-wise, for telling your manager you want to discuss pay, says Andres Lares, managing partner at Shapiro Negotiations Institute. For example, maybe you didn’t get a raise in the last year, or you did but it was below 8% — explain that given rising costs, among other factors, you want to revisit your compensation.
It also gives you an objective benchmark for how much to aim for, Lares says, which “allows negotiators to be more precise, less emotional and more confident.”
First step: Write out a script of why you’re asking for a raise. Back it up with data, including your market value and a track record of good performance. Say why you want to stay with the company. Then figure out your target raise based on how much wages have grown in your market recently, how much your company typically gives out and, finally, with consideration to inflation.
Decide if you want to ask for a specific dollar figure, percentage increase or if you want to leave it purposefully vague for HR to counter, Lares says.
Also decide if you want to go in just asking for more money. If they can’t budge on pay, can you ask for other non-salary benefits? Lately, Lares has seen more people successfully negotiate for perks like permanent remote work, fewer days in office, a title change, flexible scheduling or a four-day workweek.
Basically, Lares recommends, you can use inflation as a benchmark to make a case for a raise, but don’t put all your eggs in one basket — give your employer more things they can say yes to if it can’t be more money. Some of them translate to more money in your pocket. Working remotely more often could save you on commuting costs, for example.
Choose the “richest medium” to humanize the experience of making your ask: in-person is best, then video then a phone call.
And if you get a no, Lares says, ask when you can revisit the discussion.