Evaluating Salary Trends In The Current Labor Market

The December 2025 Employment Cost Index came out today. This chart tracks year-over-year growth in salaries and wages (ECI) for management & professional workers (orange) versus all other workers (blue) going back to the early 1980s. Management/professional roles are about 40% of employment, but they account for a disproportionate share of total labor costs — so when this line moves, it matters. A few things jump out: 1) The 2021–2023 labor-shortage era is unmistakable. Wage growth surged for both groups — but non-professional workers briefly saw some of the fastest gains in the series. That was the “workers finally have leverage” moment. 2) That surge ended. Since 2023, pay growth has cooled for both groups. It may still be cooling. 3) The next divergence may favor non-professional workers again. The college labor market is softening faster — unemployment is rising more for college grads, and AI is a plausible contributor through slower hiring and substitution in some white-collar work. Meanwhile, immigration policy is constraining the inflow of workers into many non-BA occupations, which is likely to show up as renewed shortages — and faster wage growth — in manual occupations. My bet: shortages in manual roles will reemerge, and over the next few years we’ll see the blue line run above the orange line more often. #labormarkets #wagegrowth #recruitment #AI

Navigating Pay Trends with Mercer’s Total Remuneration Survey — Insights from Cairo 2025 💼📊 The Mercer Total Remuneration Survey (TRS) session in Cairo provided an in-depth look into how organizations are recalibrating compensation strategies amid ongoing inflation and currency volatility. 🔹 Robust Benchmarking: Mercer’s TRS now spans 438 companies and 200,000 employees in Egypt, part of a 25-million-record global database — a reliable benchmark for both multinationals and local firms. 🔹 Pay Trends 2025: The projected salary movement for 2025 is 20%, exceeding the referenced inflation rate (19.7%) for the first time in years — a signal of renewed confidence and retention focus. 🔹 Functional Pay Insights: “Same incumbent” analysis shows an average 25% increase across roles, with professionals recording the highest median growth (43%). 🔹 Industry Differentiation: Life Sciences and Chemicals continue to outperform the General Market on Total Cash Compensation, while FMCG & Retail remain below median. 🔹 Benefits & Allowances: Car and transport allowances saw steady rises, aligning with cost-of-living pressures and vehicle price inflation. 🔹 Performance Pay Gap: Actual payouts remain below targets since 2022, underlining ongoing performance pressure across sectors. A key takeaway was Mercer’s call for companies to build their own internal inflation indices reflecting their employee demographics — ensuring global alignment without losing local relevance. The TRS remains a vital tool — a compass for compensation navigation — helping organizations maintain competitive pay positioning in turbulent economic waters. #Mercer #Compensation #PayTrends #HRAnalytics #EgyptMarket #AhmedFarahat

We’re in the most challenging era of salary progression of the last decade. And there's two compounding factors I see that are reducing how to grow your pay. Pave has just published their 2026 Compensation Budgets & Trends Report, and it's a detailed snapshot of the market. (grab the report here btw, well worth a read: https://lnkd.in/gnErrHN9) But here's the two things that stood out to me:   1. Salary growth has stalled, with companies budgeting a pitiful 3.5% merit increase for 2026   2. Job hugging is growing, with turnover plummeting (especially in public companies) and people staying put for longer.   So why does this matter?   For those playing at home, a 3.5% increase on a $100k salary is $3,500... ... or $67 a week. *Before tax*   Not great for anyone who’s already absorbed record-high inflation. Prices may not be rising as fast, but they’re still elevated.   But sure, salary increases have sucked for a little while now, who cares?   Well I can tell you both from first-hand experience, and report data, the biggest pay increases you will get in your career will likely come from switching employers.   – The data shows an average 15% pay increase from switching companies, – I've personally experienced closer to 30%.   That's anywhere from $11,500 to $26,500 you're leaving on the table by accepting your companies 3.5% pay increase.   And the gap compounds in years 2+   Which is why the rise in job hugging matters. It represents the biggest impact to salary growth we’ve seen in years.   Now I'm not advocating for everyone to up and quit their job every 12 months.   But I am advocating for being clear-eyed about what’s driving this, and it's impact on you.   Job hugging is being driven by fear. Months (years?) of high-profile layoffs and hiring freezes, have lead the majority of employees (55%) to state they're now prioritising job security over ambition.   And that creates a perfect storm:   We’re in a market where the two biggest levers for salary progression (annual increases and job mobility) are collapsing at the same time.   The result?   Professionals are experiencing the weakest real earnings progression in a decade, largely because fear is keeping them in roles where pay growth has flat-lined.   People aren’t earning more because the mechanisms that normally drive meaningful pay growth simply aren’t functioning.   Low salary budgets + risk-averse “job hugging” = stalled earnings.   So I'm not telling people to job hop.   But I am telling you the current environment is structurally stacked against your salary growth. And you need to understand the forces at play so you can act deliberately, not passively.   Because staying put and hoping for a better pay increase isn’t a great strategy. Not in this market. And probably not for a long while.

Wage growth is cooling off Labor cost pressures will continue to ease in the coming quarters as the balance of power shifts away from workers and to employers. We extended Heise, Pearce, and Weber's (2024) labor market tightness study by expanding the regression window through Q3-2025, adding five additional quarters beyond their original sample ending in Q2-2024. The HPW Index—a composite measure combining the quits rate and vacancies-to-effective-searchers ratio (V/ES)—has declined significantly from its pandemic-era peak of approximately 2.8 in early 2022 to -0.06 in Q3-2025, marking the first negative reading since the pre-pandemic period. This represents a substantial normalization in labor market conditions, with the index now sitting just below historical average of zero (by construction, the standardized index has mean zero over the estimation sample). The HPW Index's trajectory suggests that labor market tightness has fully unwound its extraordinary post-pandemic surge, with conditions now consistent with or slightly below the 1994-2025 average. While there may be some residual momentum in wage pressures, the 0.90 correlation between the HPW Index and smoothed wage growth suggests that wage growth should continue moderating in coming quarters as the lagged effects of reduced labor market tightness work through.

If you thought strong wage growth was a sign that the US labor market was still overheated, you can put that concern to rest. According to the Employment Cost Index, compensation and wage growth continued to slow in the second quarter of the year. Wages for private sector workers, a key metric, slowed considerably over the quarter and are now growing at an annual rate of 3.4%. This is the slowest growth since September 2020. Not only is this a slower pace compared to the past few years, but the current rate is consistent with low inflation and current labor productivity growth. Even if the firming of wage growth for non-incentive-paid private sector workers—a series closely watched by the Federal Reserve—suggests that underlying wage growth is closer to 4%, this is still a sustainable rate. With the current robust labor productivity growth, employers can afford robust wage growth. Additionally, inflation-adjusted wages remain below their pre-pandemic trend, indicating that workers could benefit from an increase in purchasing power. The wage growth data aligns with other labor market indicators: this labor market is not adding fuel to the inflationary flames.

This visualization offers a powerful snapshot of average monthly salaries across the world in 2025 and it reveals far more than simple income rankings. At first glance, the familiar narrative appears intact: global financial hubs and advanced economies dominate the upper end of the wage spectrum. Cities in North America, Western Europe and parts of Asia continue to command the highest nominal pay levels. However, the real value of this graphic lies in what sits beneath the headline numbers. One of the most striking insights is the disconnect between salary levels and lived prosperity. High wages in cities such as New York, San Francisco or London are often offset by extreme housing costs, healthcare expenses, also taxation. In contrast, several emerging or secondary markets show more modest salaries but deliver stronger purchasing power, higher savings potential, improving quality of life. Income, in isolation, is an incomplete measure of economic wellbeing. The visualization also highlights structural shifts since 2020. Certain cities have experienced significant cumulative wage growth over the past five years, while others have stagnated or declined in real terms. These movements reflect deeper forces: post-pandemic labor rebalancing, remote work adoption, demographic pressures and divergent monetary policies. Salary growth is no longer guaranteed by geography alone. From a talent perspective, this has major implications. Employers competing globally must recognize that compensation strategies anchored solely to „top-tier” cities may no longer be optimal. Meanwhile, professionals are increasingly evaluating opportunities through a broader lens - factoring in cost of living, flexibility, taxation, and long-term stability rather than headline pay. Another notable takeaway is the increasing fragmentation of the global labor market. The gap between the highest- and lowest-paying cities remains substantial, but mobility (both physical and digital) is reshaping how value is created and captured. Skills, not location, are becoming the primary currency, even if location still influences outcomes. Ultimately, this graphic underscores a critical truth: salary data is most meaningful when viewed in context. Policymakers, business leaders, and individuals alike must move beyond surface-level comparisons and focus on sustainability, affordability …and real economic opportunity. The global workforce is not just getting paid differently, it is being valued differently. Understanding where those shifts are happening is essential for anyone making decisions about talent, investment or career direction in the years ahead. Graphic by Visual Capitalist

Today’s jobs report suggests that the effect of past rate hikes is likely now peaking and confirms that the job market has slowed this summer. The increase in unemployment was primarily due to job loss rather than entry in contrast to the last two months. The slowdown in payroll growth alongside the increase in unemployment should solidify views in the Fed that the time to recalibrate monetary policy is near, if not now. Today’s report has also confirmed that runway for robust growth in Leisure and Hospitality is at an end, which means payroll growth primarily now rests on Government and Healthcare, which accounted for over 70% of payroll growth in July. Average hourly earnings growth also decelerated from June to July, further stamping out concerns over wage-driven price inflation. 1. Nonfarm payrolls increased by +114K (well below consensus) with downward revisions in June (-27K) and May (-2K). The composition of job gains became even more skewed compared to those prior months. Over 70% of payroll gains occurred in Government and Healthcare and Social Assistance. Construction made notable gains. The tech-heavy Information sector shrank, with broad declines in employment across technology and media. Later this month, the BLS will report preliminary annual benchmark revisions that may present a more downbeat picture of the labor market but likely to preserve overall trends. 2. Unemployment increased to 4.3% from 4.1%. Since May, the unemployment rate increased due primarily to reentrants and new entrants, which we would expect as wage gains continue to outpace inflation. However, in July, the unemployment rate increased primarily due to job loss. We also see the labor force participation rate for 25 to 54 year olds tick up past its 20-year high again. July’s household survey mostly aligns with the more downbeat picture presented in the establishment survey with the number of those employed part-time for economic reasons increasing. The household survey also shows a change in the mix of part-time vs. full-time employment with full-time employment increasing and part-time employment decreasing from June to July. While participation in the labor market continues to hold up, it is clear that opportunities are becoming harder to come by, making job loss more damaging. 3. Wage growth (measured by average hourly earnings) rose at an annualized rate of 2.8% (3.7% for private-sector production and nonsupervisory employees) decreasing from 3.5% (4.1% for private-sector production and nonsupervisory employees) in June. This moderation alongside the growth in labor supply should stamp out concerns about wage-induced acceleration in inflation. 4. Employment at Temp Agencies declined by -9K, continuing its slide since March 2022 with an upward revision (+26K) to the rough showing in June. Overall, the labor market appears to have slowed going into the summer, and there continue to be no signs of reacceleration on the horizon. #jobsreport #linkedin

Compensation is no longer moving in one direction. It’s splitting. Here’s what the latest data shows. and what it means if you want to find (and keep) your best work. 1️⃣ Stability is back.. but unevenly. ↳ European tech salaries held a steady 5% median increase for the second year in a row. Hiring and attrition have stabilized too. ↳ But early-stage companies? They’ve cut median salary increases by 53% and slowed promotions. If you thrive in fast-paced environments but need strong salary progression, late-stage might serve you better in 2026. 2️⃣ AI skills aren’t optional anymore. ↳ Hiring for AI/ML roles grew 88% YoY.. and these roles earn a 12% salary premium. If you’ve been waiting to upskill, this is the year to stop waiting. 3️⃣ Promotions are the real salary lever. ↳ Only 23% of employees got an in-role salary increase, but a promotion gives a 22% bump. If you’re stagnating, the issue may not be your output.. it’s the structure around you. 4️⃣ Pay transparency matters for retention. ↳ Employees paid above the 55th percentile have the lowest attrition (14%). Fair pay isn’t a perk.. it’s retention strategy. 5️⃣ Equity and flexibility remain meaningful differentiators. ↳ Most companies now offer L&D benefits, flexible hybrid options, and broader equity participation. These signals matter if you’re choosing between offers with similar cash compensation. 6️⃣ The gender pay gap problem hasn’t gone away. ↳ The adjusted gap is 2.4%, but the real barrier is representation: only 21% of leadership roles are held by women. ↳ Choosing workplaces with visible, measured commitment to equity isn’t just values-based.. it’s career-growth aligned. If you want to find your best work in 2026, pay attention to where compensation is moving.. not where it used to be. ♻️ Repost to help your network navigate promotions, pay gaps, and real growth opportunities in 2026. ➕ Follow Ben Henley for actionable tips on finding your best work.

AI is already changing paychecks and headcounts, but not in one direction. In our new paper, we measure where genAI is augmenting workers versus substituting across the U.S. economy. (cc good complementary papers by Anders Humlum and Yong Suk Lee and their coauthors) What we did: We link task-level LLM exposure to state-by-industry outcomes using QCEW and ACS microdata, interacting pre-2020 occupational exposure with year dummies and saturating fixed effects. This design traces differential trends as LLMs diffused after 2021–2022. What we find: 1) A 1 SD higher LLM exposure raised wage bills by about 4.8% by 2024 and employment by 2.7%, with establishments roughly flat. See Table 2, p. 22. 2) At the worker level, hourly wages rose 0.8–0.9% in 2023 per SD of exposure, with larger gains for ages 25–40 and college-educated workers. See Table 3, p. 23, and Table A.6, p. 47. 3) Decomposition matters. Augmenting exposure (tasks that benefit from human-AI collaboration) shows rising wage bills and jobs through 2024, while direct/displacing exposure shows declines in both. See Table 4, p. 24. Can we win plausible exogeneity? OK, it's not an RCT, but pre-trends are flat through 2021. Controlling for qualitatively teleworkability preserves the wage-bill effects, and results still strong when controlling for placebo trends. Why it matters: The direction of impact hinges on task composition, NOT job titles. Practical takeaways: conduct task audits to separate complementary from substitutable work, invest in tools and training where augmentation is feasible, and target transition support at displacing task clusters rather than broad, generic retraining. #LaborEconomics #AIandJobs #FutureOfWork #Productivity #Econometrics