Workers will likely find it hard to make ends meet again in 2027 because for now, companies are planning to hold the line on pay raises for a fourth straight year, a recent survey shows.
On average, employers plan salary increases of 3.2% based on merit and total salary increases of 3.5% in 2027, according to the Mercer QuickPulse US Compensation Planning Survey of 1,001 U.S. organizations. Total salary increases include merit, promotions, cost-of-living, and other adjustments. These increases are about the same as the actual increases in the past three years, or since 2024, 2025, and 2026, it said.
For Americans, these relatively flat increases are making it harder to keep up with the elevated inflation of the past several years. In July, annual
inflation rose 3.4%, basically swallowing the average pay hike and potentially making it harder for Americans to get ahead.
"If inflation went up after wages went up, everyone would love inflation," said Michael Ashton, managing principal at Enduring Investments LLC. "But we all know that inflation sucks, since prices go up and then, if we’re lucky, the boss man will give us a cost-of-living adjustment. It does not happen proactively."
Why are companies so stingy when Americans are getting squeezed?
Economic uncertainty is keeping companies sidelined when it comes to pay increases, the survey said. More than half (57%) of companies said they expected the economy to have at least a moderate impact on compensation decisions.
“Economic uncertainty is top of mind for employers this year, and compensation dollars are tight," said Tauseef Rahman, workplace reward solutions leader for consulting firm Marsh.
Is there any hope for a bigger pay raise?
Not all hope is dashed, though. Most company budgets aren't yet set in stone, the survey showed.
As of July, 87% of organizations said their 2027 salary budgets were still preliminary with data collection underway, while 8% had proposed budgets to leadership and only 5% had already secured approval, the survey said.
But “if projections hold, and historically they have, this will mark four consecutive years of moderate compensation increases,” Rahman said,
Promotions and pay bumps outside of the annual salary increases cycle also are an option. Nearly 2 of 3 (64%) organizations said they have provided them or will provide them in 2027, showing compensation decisions continue well beyond the annual merit cycle, the survey said.
However, the consulting firm noted that it may be harder to get a promotion next year. Employers expect to promote about 8.4% of their workforce in 2027, down slightly from 8.6% in 2026 and 9.9% in 2025, it said.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Pay raise forecast for 2027 delivers underwhelming news to workers
