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Payscale lnc., this week released its annual Salary Budget Survey (SBS) revealing that pay increases in 2024 are expected to be 3.8% on average in the United States, with higher increases seen in some states, industries, and other countries.

According to the report released Wednesday, the proportion of U.S. organizations expecting their salary budgets in 2024 to either increase or stay the same as last year is 78% — a testament to the competitive labor market of the past few years and the high expectations workers have for raises against inflation.

However, the market has cooled from the frenzy of the Great Resignation, with unemployment increasing and inflation dropping. The percentage of organizations expecting to lower their salary increase budgets in 2024 has risen from 9% to 22%.

Last year, employers were up against an inflation rate that sat at a 40-year high during salary budget planning season as well as a competitive labor market, which put pressure on organizations to go beyond the 3% salary increase that has been the standard for decades. Payscale’s 8th Annual Salary Budget Survey shows that actual pay increases in 2023 were 4% on average, which was an increase from the predicted 3.8% in last year’s survey.

With inflation decreasing and the labor market loosening, employers want to bring pay increases down to more conservative levels in 2024. However, workers may continue to expect higher pay increases to regain some of the lost value eaten up by high inflation last year, Payscale officials said.

“Although employers may want to bring salary budgets down after recent wage growth, it is still very much an employees’ labor market with skills shortages persisting in some sectors,” said Ruth Thomas, pay equity strategist at Payscale.

“When it comes to pay increases, the last few years have indicated that the new normal may be in the 3.5-4% range, but that could change if we go into a recession,” Thomas said. “In addition to salary budget reports, organizations will need to keep an eye on wage growth trends and continue to invest in up-to-date market data to remain competitive and ensure that pay is fair.”

The Salary Budget Survey analyzed data from 1,757 participating employers across the U.S., Canada and 14 international locations between May and June of 2023.