Workers could see average raises of 4.1% in 2023 — the largest pay bump since the Great Recession

In another sign of a tight labor market, U.S. companies plan to give workers their largest pay bump in 15 years in 2023, with an average hike of 4.1%.

That’s the finding from a new survey by Willis Towers Watson, a compensation consulting firm, which polled 1,430 employers in April and May. This year also saw a larger than usual average pay increase for workers of 4%; the raises are the highest since the Great Recession in 2008, when workers got an average pay bump of 3.5%.

Nearly two in three U.S. companies are budgeting for higher pay raises than they did last year, the survey found.

More from Personal Finance:
Plan for monthly child tax credit checks has trade-offs: report
Why racial justice groups want enhanced child tax credit reinstated
Protecting Social Security from inflation is high on voters’ wish lists

Among the top reasons employers cited for their larger raises are the tight labor market and worker expectations driven by inflation. Prices are increasing at their highest rate in 40 years, up 9.1% in June from the year before.

“Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive,” said Hatti Johansson, research director of rewards and data intelligence at Willis Towers Watson.

Although the planned raises may be a bit higher than in previous years, they’re still far below the pace of inflation, said Lawrence Mishel, a distinguished fellow at the left-leaning Economic Policy Institute. As a result, many households will still find their budgets tighter.

“These corporate plans are not very hopeful, in my view,” Mishel said. “The low wage increases will ensure that worker buying power falls.”