Will your employer increase your salary in 2023? Sounds like good news, at first, but inflation could eat away at your purchasing power before you can enjoy your pay raise in 2023.
Every day the effects of inflation are seen in the wages of workers in the United States, who have seen how their purchasing power has been reduced throughout the year with the progressive increase in consumer prices.
Therefore, even if you get a salary increase during 2023, this does not necessarily mean that you take more money home, as inflation will have a direct impact on your salary.
At Globe Live Media we explain how your salary will be affected by inflation in 2023.
What is the impact that inflation will have on your salary for the year 2023?
According to a study carried out by the firm SHRM, American wages are expected to grow, on average, 4% during the year 2023. Other more optimistic projections, such as Salary.com, indicate that wages could increase between 5% and 7%.
Although this may sound like good news at first, the truth is that said increase is below the year-on-year inflation rate registered in September, of 8.2%. This means, in a nutshell, that your purchasing power will not grow proportionally to inflation during 2023.
Also, despite the increase in benefits from Social Security thanks to the cost of living adjustment (COLA, for its acronym in English), the taxes that you will have to pay on your Social Security contributions will also increase.
For the year 2022, the tax contribution limit for Social Security by each employee was $9,114. Now, for the year 2023, this amount will increase to $9,932.40.
Similarly, income subject to Social Security contributions also increased. By 2022, only people earning up to $147,000 a year were required to contribute to Social Security. By 2023, this limit will be increased to $160,200 per year.
It should be noted that by 2023, the Social Security credit will also increase. This means that you will need to earn more in order to make the necessary contributions to qualify for Social Security benefits in retirement.
Health insurance costs are also expected to rise in 2023
According to a survey conducted by WTW, employers expect health benefit costs to increase by at least 6% in the coming year.
This is particularly important given that more than half of Americans obtain health coverage through their employers, paying more than a quarter of the total health insurance premium. It is precisely this amount that can make your salary not have the purchasing power it had before.