Life — as Edward Rosario knows — is expensive. He pays $1,000 a month in rent and utilities for his Lynn studio and $7 to park at the Wonderland MBTA station before work each day, not to mention spending far more on gas and groceries than he used to. And the list goes on and on. These expenses eat up most of his paycheck, leaving little left over to supplement the pool of money Rosario will eventually use to buy a home.
That’s why the unexpected additional income meant so much.
In the spring, Community Care Cooperative, a Boston organization that manages 18 local health centers, deposited a $4,000 cost-of-living adjustment (equivalent to 7 percent of his annual salary) into his bank account, along with a 5 percent bonus. He invested in dividends and used most of what remained to pay credit card bills.
“I didn’t have to put in extra hours or find another job,” says Rosario, a senior member advocate who manages the call center, among other duties. The money “let me sleep better and breathe easier.”
The skyrocketing cost of living squeezed workers in 2022, and throngs of local employers responded with financial incentives — namely pay raises, bonuses, and increased mileage reimbursements. It comes at a time when the mounting cost of well, everything, is weighing on the average American.
Nearly 2 of 3 employees nationwide have recently had to reduce spending, according to an October report from the asset management firm Mercer. Even people making $200,000 or more say inflation and economic volatility have increased their financial stress. A third of those furthest down the pay scale are taking second jobs.
Most of today’s workforce has never dealt with the kind of monthly cost increases the Federal Reserve is now fighting, says Fred Foulkes, founder of the Human Resources Policy Institute at Boston University. Prices have risen 7.7 percent over the past year. The last time Americans saw anything like this was in the 1980s.
“The problem is very real,” Foulkes says.
The C-suite seems to realize workers need more money. In a national survey of 337 companies conducted in May by the consulting firm Pearl Meyer, employers said they had already raised wages 4.8 percent on average this year; a quarter of organizations had paid out increases of 6 percent or more. (For more than two decades, total base salaries have risen far more gradually, around 3 percent annually.)
Burlington software company Progress distributed a 2 percent bonus to everyone but its upper-level employees in September, on top of the usual annual raise. Beaverbrook STEP, a Watertown social services organization, raised its hourly wage by $5 and gave workers an “inflation fighter benefit” of $500.
Edward Rosario’s boss, Community Care Cooperative CEO Christina Severin, says that, as of this year, cost-of-living adjustments (which double as raises) depend on how much a worker makes. Employees receive either a 4 percent or $4,000 adjustment to their salary annually, whichever is bigger, so the lowest-paid employees get the biggest percent increase.
“It’s progressive, not regressive,” Severin says. “Three percent on $100,000 is a lot different than 3 percent on $50,000.”
Severin’s leadership team also considered how expensive necessities have become when implementing a new system for distributing bonuses. The additional money is tied to items on The Balanced Scorecard, a goal-tracking method developed at Harvard Business School in 1992. This year, it awarded workers a 5 percent bump.
Gone are the days when raises only arrive once a year, at a set amount, and maybe a holiday bonus if you’re lucky. Instead, employers are considering what their staff is dealing with in the moment and getting creative, says Michael Collins, chancellor of UMass Chan Medical School in Worcester.
“We are not — and should not be — completely detached from reality in leadership,” he adds.
Pay increases at UMass normally arrive in the summer. But this year, the need for a bump was evident much sooner. Collins decided to give the 6,000-plus people on the payroll a 2 percent raise in March and another 2.75 percent increase in July. An additional gift came in April, when the medical school announced a staff-wide $1,750 “COVID bonus.”
The urgency was clear. One employee came up to Collins after the March raise just to say: “Now I know how I’m going to pay my rent this month.”
The Framingham human services nonprofit Advocates used federal American Rescue Plan funds the conventional way at first, issuing bonuses and increasing the hourly wage for direct care staff, who interact regularly with clients, from $14 to $17 per hour. Then in May, the company introduced PayActiv, a flexible program that lets staff members withdraw money they’ve earned before payday.
Advocates chief operating officer Regina Marshall says no plan is too outrageous for leadership to consider. “When interesting ideas come up to help people,” she adds, “we’re usually unanimous in saying ‘How can we get this done?’”
Research shows that the push to increase wages is not only decent, but makes good business sense. Even with a recession looming and power shifting back to the employer, the country remains in the grips of a labor shortage. Companies need to keep the people they have, and that is driving wage increases, too.
The Pearl Meyer survey found that 44 percent of employers cited “retention concerns” as the primary reason for higher raises this year; 30 percent said “cost of living.”
Job dissatisfaction often comes down to pay, says Connie Hadley, a lecturer at Boston University and founder of Institute for Life at Work, citing Herzberg’s motivation hygiene theory on employee satisfaction. So it makes sense that companies are doing what they can to make employees feel more fulfilled at a time when inflation is taking a toll.
“Feeling underpaid in comparison to the market and to the economy is a nagging frustration,” Hadley says. “People want to feel valued and respected, and pay is one way to signal that.”
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Diti Kohli can be reached at email@example.com.Follow her on Twitter @ditikohli_.