Are you thinking of asking for a raise? Or perhaps your latest raise was below your expectations, and you want to know how it stacks up against those offered to others.
With the rising cost of food and living expenses, a proper raise may seem only fair. But just how much is a good raise?
Below, I’ll share some key statistics on wage increases, explain how inflation could affect your raise, and outline some of the main factors that could determine your raise.
Pay increases can vary significantly, depending on factors such as:
● Your location and cost of living
● The industry you work in
● The type of company you work for
● Inflation rates
● Job performance
● Other forms of compensation you’re being offered
A great raise for one individual may be a sub-par raise for another. Before we jump into specifics, though, let’s look at some average numbers and statistics.
● For workers between 25 and 54 years old, the average wage increase across all industries between 2020 and 2022 was $2.27 (from $32.28 to $34.55), for an average raise of 7% over two years, according to Statistics Canada.
● For workers between 25 and 54 years old, the average hourly wage increase across all industries between 2021 and 2022 was $1.50, a difference of 4.5%.
● Workers between 15 and 24 years old saw an average pay increase of 8.4% between 2020 and 2022, according to Statistics Canada, which could indicate that entry-level jobs are offering higher starting pay.
● Female workers between 25 and 54 years old received an average wage increase of 6.4% between 2020 and 2022, while male workers in the same age group received an average wage increase of 7.6% over the same period across all industries, representing Canada’s gender wage gap.
Based on recent statistics alone, the average working-age Canadian should expect a 3% to 4% wage increase per year.
Inflation can play a significant role in your wage increase. Ideally, your raise should at least account for recent inflation, if nothing else. This ensures that workers have the same buying power and aren’t negatively affected by inflation.
In 2022, inflation increased by 6.8%, according to Stats Canada.
To maintain the same purchasing power, you would have needed a minimum pay increase of 6.8% to account for inflation. If your raise is less than this, then you’d have reduced buying power compared to the year before.
You could potentially take the most recent inflation rates to your employer when doing your performance review if they offer you a lower raise than inflation. It won’t be guaranteed to work, but it’s a compelling argument.
To wrap up, let’s go over a few other factors that could affect your wage increase.
1. LOCATION AND COST OF LIVING
The city or town you work in could have a dramatic effect on both your pay and wage increase percentage. For example, workers in cities like Toronto and Vancouver should expect higher wages and a higher wage increase to account for the higher cost of living.
Those living in smaller cities and rural towns may earn less and receive a lower wage increase, as the cost of living may not have changed as drastically compared to larger city centres.
2. THE INDUSTRY YOU WORK IN
While the average wage increase between 2020 and 2022 was 7% across all industries, two key industries showed significantly higher wage increases, according to Statistics Canada’s latest wage increase report:
● Finance, insurance, real estate, rental and leasing: 9.34% average pay increase ($36.93 to $40.38) for workers 25 to 54 between 2020 and 2022
● Professional, scientific and technical services: 10.35% average pay increase ($38.83 to $42.85) for workers 25 to 54 between 2020 and 2022
Contrast this with the two industries that showed the lowest wage increases between 2020 and 2022, and you can see the difference a job industry makes:
● Public administration: 2.82% average pay increase ($40.49 to $41.63) for workers 25 to 54 between 2020 and 2022
● Educational services: 2.74% average pay increase ($37.25 to $38.27) for workers 25 to 54 between 2020 and 2022
3. JOB PERFORMANCE
If you’ve recently received write-ups or reprimands at work, your employer may be less likely to offer a competitive wage increase. While you may still receive a basic increase to account for inflation, your raise may not be as favourable as those who’ve exceeded their performance expectations.
Conversely, you should expect a greater wage increase if you’ve gone above and beyond, setting a great example at work.
4. ADDITIONAL COMPENSATION
Some industries, such as sales, may not increase your base salary or hourly wage. Instead, employers may compensate employees with other forms of compensation, such as:
● Higher sales commissions
● Discounted company stocks
● A share in the company and its profits
● Paid time off
Often, these alternative forms of compensation can be worth more than a standard raise. Other companies may offer a combination of a wage increase and additional compensation.
If you’ve tried asking for a raise, exceeded performance expectations, and still aren’t getting paid what you believe you’re worth, it may be a good idea to apply for other positions. If you get a better-paying job offer, you can accept it or use it as leverage to negotiate higher wages with your current employer.
Either way, it never hurts to see what’s out there. A great-paying position may be just an interview away!
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
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