(WXYZ) — If you've bought gas or walked into a grocery store in the last several months, you already know that inflation is impacting our daily lives.
The latest data from the U.S. Bureau of Labor Statistics shows consumer prices jumped 7% in December, a near-40-year high. It was up 6.8% for November, and all of this is happening while annual pay increases range from 3-5%.
Is inflation moving the dial for raises in 2022? The short answer is yes. Employees have bargaining power right now. How much will depend in your role and your specific company.
“The inflation that we’re experiencing right now is a residual effect of the decision that the central banks around the world made last year to flood our economy with money," Matthew Roling, an adjunct finance professor at the Wayne State University Mike Ilitch School of Business, said.
Roling said that it has helped avoid a deep depression from the pandemic. On the other side of that, if things continue to cost more, will employers give larger raises?
“Employees have a lot more bargaining power with their employers right now than I think we’ve seen in years," Roling said.
Generally speaking, wages in the U.S. are on the upswing, but most annual raises are between 3-5%, below current inflation.
"What conversations are you having with companies and business leaders about how they're planning those salary budgets for 2022?" I asked Jeff Hyman, who runs Recruit Rockstars. He's also the CEO of Venturesome.com.
“I’ve never seen so much uncertainty in the financial planning, the budgeting process, as companies are going through right now," he said.
Hyman works with small and mid-sized national companies, all of which he said are preparing to put more in the pot for salaries this year.
“They range from, 5%, which is even below where the current inflation rate is, to some companies that are increasing 20% because they’re so desperately hanging on their current employee base," he said.
According to The Conference Board, salary increase budgets are headed toward 4% this year, the largest hike since 2008.
“The Federal Reserve underestimated how bad inflation would be and how long it would last," Roling said.
Just this week, Fed Chair Jerome Powell warned high inflation is a serious threat to getting more Americans back to work. The Fed is prepared to raise interest rates more over time if needed, he said.
For both employees and employers, consider alternative or creative ways to boost pay. More vacation time, increased benefits, sign-on or performance bonuses are some ways.
He said employees should keep the focus on their contributions, not inflation, even if it's a big driver.
“That’s far more compelling than saying, 'Hey boss, costs are going up, salaries are going up, where’s mine?'" Hyman said.
Hyman also said once salary budgets go up percentage-wise, it's hard to bring them down without really impacting morale, so that's something companies will be grappling with.
Now, he said, is the time for that salary talk if you've been waiting.