You can probably forget about that pay hike matching inflation

NEW YORK (BLOOMBERG) - Workforce consultant Willis Towers Watson found that 98 per cent of companies globally will increase salaries this year, at an average rate of 3.4 per cent, the fastest since 2008.

But inflation is running much faster.

The hottest inflation in four decades has prompted some United States employers to open the spigot on pay, but plenty still will not budge - leaving workers in the lurch with a pay cut, according to a separate poll by Gartner.

Nearly one in four executives said they are not making any changes to pay in response to inflation, an increase from the 18 per cent who said so in December last year. That reluctance - fueled in part by expectations that inflation will ease - comes amid a tight labour market and rising prices for everything.

Gartner's survey, conducted late last month, also found that about one in four executives planned to boost pay, but not at a level that would keep pace with inflation. Just 13 per cent said they planned to increase compensation at a rate commensurate with inflation for all employees.

More than six out of 10 workers are concerned about their salary keeping up with inflation, a separate survey from the US Conference Board found.

In the US, consumer prices rose 7.5 per cent in January from a year ago following a 7 per cent annual gain in December. The typical US household is spending an additional US$276 (S$374) a month on goods and services because of rising inflation, according to Moody's Analytics. When adjusted for inflation, average hourly earnings fell 1.7 per cent in January from a year earlier, the 10th straight decline.

It helps explain why 62 per cent of US workers polled by the Conference Board are worried that their pay will not keep up with inflation. That figure rises to 72 per cent among millennials, the generation born between 1981 and 1996 that comprise the fastest-growing part of the US labour force.

"Some companies that had been planning on making that pay adjustment decided not to do it," Dr Brian Kropp, Gartner's head of human resources research, said in an e-mail. "The two most common reasons for pulling back are that they started to believe that inflation would not be as permanent and therefore didn't need to bake it in, or realized they couldn't actually afford it given how their financials played out."

Companies are still doling out merit-based increases but typically are not hiking pay based on inflation alone, according to the Gartner survey.

To be sure, wages have risen recently, particularly for lower-paid or hourly roles, and companies of all stripes are expanding their compensation budgets this year. Target, McDonald's and Amazon.com have all boosted their starting or average hourly wages over the past year, while on the higher end of the pay scale, JPMorgan Chase & Co and Citigroup have raised junior bankers' pay to keep them from fleeing to cryptocurrency or fintech start-ups.

One gauge from the Federal Reserve Bank of Atlanta shows a 5.1 per cent annual pace of wage gains, the best in two decades.