You are probably getting a raise this year. Most people are. It is still, for the average worker, a pay cut.

The number that keeps you level in 2026 is 3.4%, because that is how much consumer prices rose over the twelve months through July (U.S. Bureau of Labor Statistics). Anything below it is a smaller salary wearing last year’s clothes.

Employers budgeted 3.2% for merit increases (Mercer).

Not advice: This is educational information built on published federal statistics and a named employer survey, not financial advice. National averages are a starting point for your own arithmetic, not a substitute for it.

The gap is small, and it shows up three separate ways

One statistic can be an artefact. Three that were collected differently and land in the same place usually are not.

Prices. The Consumer Price Index for All Urban Consumers rose 3.4% over the twelve months to July 2026, and 0.1% on a seasonally adjusted basis in the month itself (U.S. Bureau of Labor Statistics). Stripping out food and energy, the core index rose 2.5% over the year (U.S. Bureau of Labor Statistics). That matters, because it means the headline number is being pushed up by exactly the things you cannot stop buying.

Paychecks. Average hourly earnings for private-sector employees reached $37.62 in July, up 3.2% over the year (U.S. Bureau of Labor Statistics).

Total compensation. The Employment Cost Index has wages and salaries for civilian workers up 3.2% over the twelve months to June 2026, with total compensation up 3.4% once benefits are counted (U.S. Bureau of Labor Statistics).

Put the first two together and you get the cleanest version of the story. Real average hourly earnings, meaning pay after inflation, decreased 0.2% over the twelve months to July (U.S. Bureau of Labor Statistics).

The average American worker got a raise this year and can buy slightly less than they could last year.

What your employer has already decided

Salary budgets are set in the autumn, months before anyone has the conversation with you. Mercer surveyed more than 1,000 US organisations in late October and found employers planning “base salary increases for merit at 3.2%, and total increases at 3.5%” for 2026, “same as the actual increases employers reported in 2025” (Mercer).

So the pool your raise comes out of was fixed before you did any of this year’s work, and it was fixed at roughly the rate of inflation minus a fraction.

Two details from the same survey matter more than the headline figure.

The first is that being good at your job is doing less work than it used to. More than eight in ten employers, 83% of them, said they would “distribute their salary increase budgets equally across the organization, rather than directing more resources towards high-demand skills or critical market gaps” (Mercer). If almost everyone gets the same percentage, a strong performance review is not a lever. It is a formality.

The second is where the money actually is. Employers plan an “average pay increase for promotions of 8.7%”, while planning to promote “around 9% of their workforce, down from 10% in 2025” (Mercer).

That is the whole picture in two numbers. The promotion is worth roughly two and a half times the merit increase, and there are fewer of them.

What that means in dollars

Percentages are easy to nod at and hard to feel. Convert them.

Take a salary of $70,000. To stand exactly still against a 3.4% rise in prices, you need $72,380. That is a raise of $2,380 which leaves you precisely where you started.

A 3.2% merit increase gives you $72,240. You are $140 short of level. Not ruinous, but it is a cut, and it is the fourth or fifth one in a row for a lot of people.

The 8.7% promotion increase gives you $76,090, or $3,710 clear of inflation.

These figures are arithmetic on the published averages, not a forecast of your own outcome.

The gap between those last two outcomes is the entire argument for changing what you ask for.

So ask for the promotion, not the raise

Most articles stop here and hand the question back to you. This one will not. The structure of the 2026 budget makes the answer the same for nearly everyone with a case to make.

Asking for an above-budget merit increase means asking your manager to take from a fixed pool that 83% of employers have already decided to spread evenly (Mercer). You are asking them to do something the compensation process is designed to prevent, on your behalf, against a colleague.

Asking for a promotion is a different transaction. Promotion budgets are separate, they carry a materially larger number, and the case is about scope rather than merit: what you now own that you did not own last year, and what it would cost to hire that from outside. Your manager is not redistributing anything. They are arguing for a headcount level, which is a thing managers are used to arguing for.

If a promotion genuinely is not available, the honest fallback is not a better raise conversation. It is the external market, where the increase is priced by demand rather than by a budget set last October.

Two caveats worth taking seriously

The CPI is a national average across a fixed basket. Your basket is not the national one. If your rent reset this year, or you drive a great deal, or you are paying for childcare, your personal rate of inflation is likely above the national 3.4% (U.S. Bureau of Labor Statistics) and the number you need is higher than the one in this headline. If you have a fixed mortgage and a short commute, it may be below.

And these are averages. Averages describe the middle of a wide distribution, not you. The point of the headline figure is not that it is your number. It is that it is the floor below which a “raise” is a reduction, and knowing where the floor sits is what makes the conversation a negotiation instead of a thank-you.

If you want to check what a given number is actually worth after self-employment tax and expenses, our freelance rate benchmark runs the same arithmetic from the contractor side.