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Americans are expecting a 6.7% wage hike this year: ADP report

Given the headlines about companies in the tech and other sectors laying off workers by the thousands over the past few months, many people might be feeling grateful just to hold onto their jobs, let alone to earn a raise this year. But a new study from the ADP ADP, -0.65% Research Institute suggests essentially

americans-are-expecting-a-6.7%-wage-hike-this-year:-adp-report

Given the headlines about companies in the tech and other sectors laying off workers by the thousands over the past few months, many people might be feeling grateful just to hold onto their jobs, let alone to earn a raise this year.

But a new study from the ADP ADP, -0.65% Research Institute suggests essentially the opposite — that U.S. workers are anticipating a relatively hefty 6.7% hike in pay this year. And it reflects a global trend: In countries around the world, workers are expecting compensation increases ranging from 5.3% in the Netherlands to 12.8% in Argentina.

Are these expectations reasonable? Nela Richardson, ADP chief economist, thinks so. She says the expectations reflect a confidence born of the fact that U.S. workers received an average 6.5% raise last year, according to ADP data — a figure that was driven by inflation and a tight job market.

Granted, wages are starting to decline in 2023, according to the U.S. Bureau of Labor Statistics, which reported a 1.6% decrease in weekly earnings in March over the previous year. But Richardson notes that wages are still higher than they were before the pandemic. She also points to ADP survey data showing that 50% of North American workers feel they’re underpaid, so they’re likely thinking they have reason to expect more.

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Add it up, and a 6.7% raise for U.S. workers may not be so farfetched, especially with inflation continuing to be a factor.

“I really don’t think the [worker] optimism is misplaced,” says Richardson.

That’s a view seconded to some degree by Agron Nicaj, a U.S. economist with MUFG Bank.

“The labor market remains tight, and as a result, workers continue to have significant bargaining power,” he says. Still, he warns that “labor demand is beginning to show signs of cooling.”

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As for why pay expectations vary so much from country to country, Richardson says that’s a function of how local economies differ. She wasn’t surprised to see Argentinians anticipating a 12.8% wage hike, for example, given that country’s high inflation.

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