Where Have the Salary Increases Gone?

At first, the recruiter’s call flattered Jake. Most of the people he knew were struggling to find work, and here he was, not only holding a job, but also getting offered another one by a rival company. Then he heard the salary bump they were proposing—and he suddenly felt more insulted than flattered.

Amid slowing growth and a tighter job market, managers and people leaders face a new challenge—hiring people without being able to offer huge pay increases. Wages grew 3.8% in the 12 months that ended August 31, the lowest annual growth rate in two years. Similarly, data shows that salary increases for people switching jobs are averaging just 7.7%, a far cry from the 6% annual wage growth and 20% salary increases companies were paying during, and in the immediate aftermath, of the Great Resignation a few years ago. “The labor market has been through a few periods of disruption in recent years,” says Ron Seifert, North America workforce reward and benefits leader at Korn Ferry.

The fluctuations in wage growth, Seifert observes, are partly due to the wave of overhiring and the layoffs that followed. As people have left their jobs, companies have either not replaced them or done so with lower wage earners. At the same time, fewer outside opportunities and the security of their current roles are making people less likely to jump ship. “Tenure is often the enemy of compensation growth,” says David Ellis, senior vice president for global talent acquisition transformation at Korn Ferry. 

The combination of slower hiring and diminished turnover is driving down wage and salary increases. To be sure, wage growth started slowing this summer—slipping below 4% for the first time since 2022—at roughly the same time that hiring began to decline. And that pressure is likely to continue at least into next year, given the closeness of the presidential race in the US and the accompanying uncertainty around the economic outlook. Korn Ferry estimates average salary increases of 3.5% in 2025 across all employee groups, for instance.

All of which points to a problem: Just because companies are paying less doesn’t mean they have the talent they need. In fact, study after study shows that a significant percentage of business leaders feel they don’t have the right skills and talent in place. Many firms utilize a variable pay strategy that uses a combination of salary, incentives, as well as sign-on and retention bonuses, to attract top performers or people with in-demand skills, says Tom McMullen, a senior client partner in the North America Total Rewards practice at Korn Ferry.

If they can’t offer large salary bumps, however, Ellis says hiring managers and people leaders need to find other ways to attract talent. He notes that employees, particularly younger ones, value flexibility and learning and development opportunities as much as pay; this, he says, is one area where employers could focus recruiting and retention efforts. “How are you talking about that to the market, and how closely does that match the lived experience you are actually offering?” he asks. Moreover, as companies move to skills-based hiring, he suggests looking for talented people in non-traditional paths who are willing to compromise on pay for the opportunity to transition to a new role or industry.

Experts also advise tapping into the company’s mission and culture to “sell the dream of working there,” says JP Sniffen, practice leader for the Military Center of Expertise at Korn Ferry. For her part, Shanda Mints, Korn Ferry’s vice president for RPO analytics and implementation, says there’s no better recruiting tool than appealing to a candidate’s individual motivations and passions. Some people are driven by innovation and cutting-edge technology; others by security and stability. Whatever it is, she says, “the ability to get at that is what attracts talent.”

Learn more about Korn Ferry’s Total Rewards capabilities.

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