2027 pay raises are forecast to get smaller again
Gallagher and WTW surveys show employers planning smaller 2027 pay raises as inflation and a cooler job market squeeze workers.
By Frankie Delgado · News Reporter
3 min read
2027 pay raises are shaping up to be thinner than this year’s, according to fresh compensation forecasts from Gallagher and WTW, as employers start setting next year’s pay budgets while households keep battling higher prices.
Gallagher, the consulting firm, estimates employers are planning an average overall pay increase of 3.3% for 2027, according to Tom Wardrip, a managing director in the firm’s compensation and rewards practice. That would be down from an average 3.8% increase this year, which Wardrip said was already lower than the prior two years.
WTW, another consulting firm, found a similar picture. Its survey showed companies budgeting for a 3.4% rise in salary budgets next year, just under the 3.5% actual increase reported for this year.
How much will pay raises be in 2027?
The current forecasts point to average 2027 pay increases of about 3.3% to 3.4%, based on Gallagher’s estimate and WTW’s survey. A salary budget is the pool of money an employer sets aside for raises, promotions and other pay adjustments, so an average budget increase does not guarantee every worker will get that exact raise.
The expected slowdown is modest, according to the data. Wardrip noted that employers in recent years have often ended up paying more than they initially planned, though he said the gap between planned and actual pay increases has been getting smaller.
Wardrip said the pandemic-era Great Resignation and the burst of inflation pushed companies into unusually large raises. Outside those years, he said salary-budget increases around 3% to 3.5% were fairly standard.
The smaller raise forecasts arrive while workers are still feeling pressure from prices. The Bureau of Labor Statistics said inflation ran at 3.5% year over year in June. MarketWatch reported that inflation outpaced wage growth in April and May as energy prices rose during the Iran war, before wages grew faster than inflation in June.
Energy costs remain a worry. Gas prices have moved back above $4 a gallon, and MarketWatch reported that global benchmark oil prices reached $100 on Thursday as Middle East tensions stayed in focus. Axios reported that President Donald Trump said he was nearing a decision on a “massive attack” against Iran.
Would changing jobs bring a bigger raise?
ADP’s June pay data showed job switchers had stronger wage gains than workers who stayed put. People who changed employers saw average pay rise 6.6% from a year earlier, while people who remained in their jobs saw a 4.4% increase, according to the payroll company.
Finding that next job may be the hard part. Economists have described the labor market as a “low-hire, low-fire” environment, with solid headline numbers but tougher conditions for people searching for work.
Indeed’s latest labor-market snapshot said new job postings in June had returned close to prepandemic levels. Its analysts also wrote that advertised pay in job listings has been rising more slowly than prices since the middle of last year, a trend they said could put more strain on household buying power.
For employees, the message from the latest pay forecasts is blunt: raises are still in the plan at many companies, but the big pandemic-era bumps continue to fade.
This story draws on original reporting from MarketWatch.