Greg McBride, Chief Financial Analyst at Bankrate.com, joins Yahoo Finance’s Sibile Marcellus in this week's Career Control to discuss the pay situation for workers and trends in pay raises.
JARED BLIKRE: As inflation soars, 52% of Americans are earning the same pay today as they did prior to the pandemic. So how can they get a raise to accommodate rising living costs? Well, here's Sibile Marcellus with the latest installment of Career Control. Sibile.
SIBILE MARCELLUS: Inflation is squeezing the budgets of many workers with the price of gas, cars, housing, grocery, and clothing all going up. Bankrate is out with a new survey that shows that more than half of workers have not received a raise or promotion this year. I want to bring in Bankrate's Greg McBride to break this down for us and also to find out if he has any tips for many more workers who would like to get some of those raises. Now, Greg, welcome. Pay stagnation may be coming at possibly the worst time, given inflation. Looking at your study, what's the pay situation for workers right now? And how many workers did not get a pay raise?
GREG MCBRIDE: Well, even though these circumstances coming out of a pandemic, reopening the economy, are very unique, some of these results were not. And so the 56% of workers that say they have not received a pay increase in the last 12 months, that's right smack in the middle of the range that we've seen, dating all the way back to 2016. So not out of the norm there. One of the things that we did notice that's a little bit more unique to 2021, we did see an increase in cost of living increases. The most we've seen in any year that we've polled this, it's still the exception rather than the rule. But I think that's certainly in tune with the higher inflation that everyone is feeling.
SIBILE MARCELLUS: And how serious is the current pay situation? And how does inflation spell trouble for Americans' purchasing power?
GREG MCBRIDE: Purchasing power, I mean, that's really the name of the game, right? It's, you know-- just like net pay, [INAUDIBLE] is really what matters, not gross pay. Well, buying power of your money, it's not how many dollars as much as what are the buying power of those dollars. And, you know, we found that, you know, 56% of workers haven't received a pay increase in the last year. Still a little bit more than half, 52%, are not earning any more than they had been pre-pandemic.
And but yet, inflation is going up. So their buying power is getting squeezed. We see it every time we go to the supermarket or put gas in the car. And so, what that does is, when you've got a limited number of dollars, it just puts the squeeze on the discretionary spending. People pour more and more of that pay into the essentials. And there's less left over for disposable. Bears repeating, more than 2/3 of our economic output is tied to consumer spending.
SIBILE MARCELLUS: And Greg, close to 44% of workers got a raise or a promotion this year. What's the most common reason for people getting those raises?
GREG MCBRIDE: Yeah, the most common reason was performance-based. And this is consistent with what we've seen in years past. Two out of every three that got a pay increase, it was either performance-based, or it was they managed to get a better job, take on more responsibility, promotion. I mentioned the cost of living increases. That's still very much the exception rather than the rule. The gap is narrowed a little bit, but most employers still being a bit selective with regard to how they dole out pay increases.
SIBILE MARCELLUS: And Greg, how about workers who switch jobs during the pandemic? Why are they seeing higher pay growth than those who stayed with their employers?
GREG MCBRIDE: Well, I think a lot of this has to do with sort of where you are in terms of your career, your particular vocation, and are you acquiring new skills and talents that make you a hot commodity if you're a free agent. We saw that mobility much higher among younger workers and older workers, and millennials about five times as likely as baby boomers to switch jobs. And that's where we noticed that there was, particularly among lower and middle income households, the likelihood of getting a pay increase came from those that switched jobs. It was the higher income households that were more likely to see a pay increase at their current job.
SIBILE MARCELLUS: And for workers who haven't gotten to raise, but feel like they need one, given inflation, what are some tips for getting a raise that accommodates for rising living costs?
GREG MCBRIDE: Yeah, I think it's-- at the end of the day, it's incumbent upon us as employees to demonstrate the value that we provide to our employers. This is a very competitive labor market. And so if you've got experience or skills or talent that's going to be tough to replace, your employer has an incentive to keep you happy. And so but you've got to demonstrate and enumerate what separates you from the crowd. I mentioned the competitive labor market. That also works in your benefit because, you know, if your current employer is in a position to pay you what the market will bear, you can be a free agent. A lot of competition, other employers are looking to hire as well.
SIBILE MARCELLUS: And Greg, did you see a difference in terms of workers who are able to get a pay raise among those with a college degree versus those who don't have one?
GREG MCBRIDE: Yes, we did see that did skew more toward more education. And so those that had a college degree were more likely to not only have gotten a pay raise in the last 12 months, but be making more money now than they were pre-pandemic. And then what we noticed is that at lower levels of education, it just kind of stair stepped. The likelihood of getting a pay increase just stair steps down. Those who had some college but not-- didn't get a degree, you know, they were a little bit better off than those with only a high school diploma, but not as well as those who actually had a college degree. So, you know, education still very much at a premium in today's labor market.
SIBILE MARCELLUS: Well, Greg McBride, thanks so much for sharing those tips on how to get more raises. Thanks so much. Great to have you on, Jared.
JARED BLIKRE: Well, thanks for that, Sibile. It almost makes me want to go ask for a raise. Apollo?