Isn’t getting a 6% elevate amid inflation really taking a pay lower?

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A worker helps a customer at the Presidente Supermarket in Miami on April 13, 2020.

Joe Raedle | Getty Images

Workers in the US wonder how rising inflation could affect their takeaway wages.

Inflation has risen faster than expected. In October, consumer prices rose 0.9%, pushing the year-over-year gain to 6.2%, hitting a 30-year high, according to the US Bureau of Labor Statistics.

It was the second straight month that inflation was higher than economists expected.

The consumer price index rose in September by 0.4% compared to the previous month and 5.4% compared to the previous year. That report resulted in a 5.9% increase in the cost of living for those with Social Security, the biggest jump in 40 years.

So if you don’t get a 6.2% raise this year, is that technically a cut? Not necessarily, say some financial experts.

“It’s much more nuanced,” says AnnElizabeth Konkel, economist at the Indeed Hiring Lab. “That depends on your shopping cart as a consumer.”

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Not necessarily a cut in salary

While overall inflation has skyrocketed, the consumer price index takes into account a number of factors, some of which contributed more to the rising costs than others.

“For most people, the prices of things they have to pay for are rising, but the effects vary widely across the board,” said Mark Hamrick, senior economic analyst at Bankrate.

Energy costs in October made a big contribution to the overall increase. Energy was up 4.8% month-over-month and gasoline was up 6.2%. Groceries increased 0.9% while home groceries increased 1%.

The increases over the course of the year are even more impressive. Energy prices have increased 30% in the last 12 months, and gasoline has increased nearly 50% over the same period. Used car prices rose 2.5% in October, more than 26% year over year.

Because of these inflation nests, most consumers will not see their individual costs rise 5.4% across the board. For example, if you are not planning on buying a car or making trips that would be affected by higher fuel prices, you will not be hit by the highest areas of inflation.

“Not everyone has flown on a plane or bought a used car in the last year,” said Brett Ryan, senior US economist at Deutsche Bank.

“The data doesn’t tell the personal story of each individual,” noted Bankrate’s Hamrick.

Who is most affected by inflation

Of course, that doesn’t mean people don’t feel the impact of higher prices on their budget.

And some people are hit harder than others by inflation, generally those on the lowest incomes and therefore most vulnerable to price increases.

“Inflation is really weighing on those on the lower end of the income spectrum,” said Ryan, adding that energy prices end up being one of the hardest to manage.

When you drive to work … it’s problematic when gasoline prices are up a dollar a gallon.

Brett Ryan

Senior US economist at Deutsche Bank

“That’s one area where it’s harder to customize your purchase quickly,” he said. “When you drive to work you have to fill up the gas tank, which is problematic when gas prices are up a dollar a gallon.”

Businesses are also being hit by soaring costs, which could result in wages not keeping pace with inflation this year. The budgeted average salary increase in the US for 2021 is 3%, according to the Conference Board. The group also forecast that cash on wage increases will be around 3% in 2022.

“Companies that look at their budgets can see that [raises] are unlikely to do justice to inflation, “said John Dooney, human resources manager at the Society for Human Resources Management.” But what we’re seeing is more strategies to really reward top performers. “

So apply for a raise now

Even if you are hit by higher prices due to inflation, experts don’t advise against using this as a reason for a raise at work.

“I suspect that would lead to a messy argument with a hiring manager because someone in that position could turn around and say, ‘We’re seeing price increases too,'” Konkel said, adding that people should probably ignore inflation stimulate any reward or discussion.

Instead, take the time to evaluate and reflect on what you’ve accomplished in your role, she said. If you’ve been in the position for more than a year, assumed more responsibility, or otherwise exceeded that, this is all information that you should discuss with your manager or bring for a performance review if you have it by the end of the year.

Dooney said it will likely make it easier for high achievers to ask for more money, and companies may be more willing to give out one-time bonuses to reward employees.

In addition, experts do not recommend that workers necessarily quit their jobs if they do not receive a raise that will now offset inflation. Economists do not expect sustained volatility and prices to stabilize as the economy continues to recover.

“My expectation is that these things will take care of themselves,” said Konkel.

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