Salary increase 2027: raise budgets stall at 3.5% as prices climb

If you're hoping for a raise next year, the math just got harder. The latest surveys put the typical salary increase 2027 budget at about 3.5%, and the October 14 inflation report showed consumer prices up 3.7% over the past year. For many workers, an average raise may not keep up with the cost of living.

That doesn't mean bigger raises are gone. It means they are going to fewer people, for specific reasons, and the workers who get them tend to ask early and come prepared. Here is what the new numbers say and what you can do about them this month.

What the salary increase 2027 surveys say

Three big compensation surveys released over the late summer and early fall tell the same story: budgets are flat.

• The Conference Board (September 3) found employers budgeting a median 3.5% for 2027 base-pay increases, the same as in 2026, with most falling between 3% and 4%. The median merit budget is 3.1%. Technology and telecom employers lead at about 3.7%, while retail, wholesale, government, nonprofits and education sit near 3.0%. (The Conference Board)
• Mercer, now part of Marsh (August 31) surveyed 1,001 US organizations and found an average merit budget of 3.2% and a total salary increase budget of 3.5%. High tech (3.8%) and banking (3.7%) plan the largest merit budgets; consumer goods (2.9%), healthcare and retail (3.0% each) the smallest. Marsh's Tauseef Rahman summed it up plainly: "compensation dollars are tight." (Marsh)
• WTW expects US budgets to average 3.4% in 2027, slightly below the 3.5% employers actually gave in 2026. (SHRM)

One detail matters a lot for timing. When Mercer fielded its survey in July, 87% of organizations said their 2027 budgets were still preliminary. Many companies finalize pay plans in the fall, so raise budgets can still move. In short, the salary increase 2027 picture is steady but tight, and now is the time to make your case.

Why a 3.5% raise may feel like a pay cut

The Bureau of Labor Statistics reported that consumer prices rose 3.7% in the 12 months to September. Prices jumped 0.6% in September alone, and gasoline did much of the damage: it rose 9.1% in the month and is up 34.2% from a year ago. (BLS)

The same day, the BLS said real average hourly earnings, meaning pay after inflation, fell 0.7% over the past year. (BLS) Put simply, the typical paycheck buys a little less than it did last fall.

There is one nuance worth knowing. Core inflation, which leaves out food and energy, was 2.6%. How much your raise gets squeezed depends partly on how much of your budget goes to fuel and utilities. Still, a raise that only matches the average is unlikely to leave you ahead.

A 3.5% raise is where the conversation starts, not where it has to end.

Where the bigger raises are going

Employers aren't spreading pay raises evenly. The Conference Board found the median pool for promotions, pay equity, market adjustments and retention is just 0.5% of payroll, so those dollars go to a small group.

Skills are the deciding factor. About 38% of organizations said AI and machine-learning skills are driving base-pay increases, more than any other skill. Leadership and people management (30.7%) and data science and analytics (30.4%) came next. Yet only 3.4% set aside money specifically for employees who gain in-demand skills, and 63% still build pay ranges around the job title rather than skills. That gap means you usually have to point out your new skills yourself.

Promotions are the other path. Mercer found employers expect to promote roughly 8.4% of their workforce in 2027.

And changing jobs still pays. Wage growth data from ADP tells the story: its September figures showed base pay up 4.8% year over year for people who switched employers, versus 3.0% for those who stayed. Measured by gross pay, the gap was wider still: 7.3% for job-changers and 4.4% for job-stayers. (ADP)

How to negotiate a raise before budgets lock

If your company sets pay in the fall or at year-end, the next few weeks are your window. A focused plan beats a vague request.

1. Ask for the meeting now. Tell your manager you'd like to talk about compensation before 2027 budgets are finalized. Managers often need time to argue for exceptions.
2. Bring market data. Look up pay for your role, level and city using salary tools and job listings that post ranges. Real postings are some of the most persuasive evidence you can bring.
3. Show your impact in numbers. List what you delivered this year: revenue, time saved, customers kept, projects shipped. Tie each item to a business goal.
4. Name your new skills. If you picked up AI tools, data analysis or people-management experience, say so directly. Those are the skills surveys show employers are paying for.
5. Ask about the right pool. If the merit budget is capped, ask whether a promotion, a market adjustment or a retention increase is possible. Those come from a different budget line.
6. Have a plan B. If base pay can't move, ask for a review date in six months, a one-time bonus, more paid time off, training funds or a title change that sets up the next raise.

Keep the tone factual and forward-looking. "Here's what I've delivered and what the market pays for it" lands better than "everyone else got more."

Job Elf tip: Before your pay conversation, write a one-page "year in review" with three to five measurable wins and the skills you added. Send it to your manager a day ahead so they can bring it to the people who approve raises.

Negotiating a better offer if you're job hunting

The ADP numbers show why job seekers have more room to negotiate than people waiting on an annual raise. A few habits help:

• Ask for the range early. In a first conversation, it's fair to ask what the budgeted range is for the role.
• Counter with a reason. Anchor your counteroffer to market data and to what you'll bring, not to your current salary.
• Look at the full package. Bonus targets, signing bonuses, remote or hybrid days, retirement match and start date are all negotiable.
• Get it in writing. Confirm the final numbers in the offer letter before you resign from your current job.

If you're starting a search, browse current openings and create a free Job Elf Profile so employers can see your real experience and skills first. For more on preparing for interviews and offers, see our resources for candidates.

The bottom line

Salary increase 2027 budgets are steady at around 3.5%, while inflation is running a little above that. Average raises may not keep pace, but targeted raises, promotions and job changes still pay more. Ask early, bring evidence, highlight in-demand skills and know your alternatives before budgets close.