A raise feels like a win until you price it.
You open the letter, see a bigger number and assume you’re ahead. The raise that counts is the one left over after the grocery store, the utility company and your landlord take their share.
Employers reported pay increases in about the same narrow band in 2024, 2025 and 2026, according to Marsh’s Mercer QuickPulse Survey. The number on the letter kept going up, and so did the price of nearly everything it was supposed to cover.
That balance has now tipped against you. Employers have set aside 3.2% for merit raises next year, while consumer prices rose 3.4% over the 12 months through August, the latest reading from the Bureau of Labor Statistics.
So the default outcome of your next review is a pay cut dressed up as a raise. That leaves one variable you control: whether you ask for more, and how.
Ramit Sethi, the author of “I Will Teach You to Be Rich,” has a blunt answer to the 3% review. He tells workers to stop thinking in percentages and ask for a dollar figure, starting at $5,000.
I ran his advice against this fall’s pay data. The ask holds up, and so does his headline math, with two caveats you should know before you walk into that meeting.
Ramit Sethi says ask for $5,000 when your employer’s 3.2% raise won’t match 3.4% inflation.Oscar Wong / Getty Images
What September’s payroll report showed about your paycheck
Nonfarm payrolls grew by 29,000 in September, and the unemployment rate held at 4.2%, with 7.1 million people out of work, according to the Bureau of Labor Statistics release of Oct. 2.
Average hourly earnings rose five cents to $37.81, a 3.0% gain over the year. At the average workweek of 34.4 hours, that works out to about $67,635 a year.
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That’s an average across private-sector workers, so treat it as a yardstick for your own review rather than a typical salary.
The revisions were worse than the headline. July went from a gain of 21,000 to a loss of 10,000, and August fell from 162,000 to 133,000.
Why a 3.2% raise loses ground to inflation
Employers plan to spend 3.2% of payroll on merit increases in 2027 and 3.5% on all salary increases combined, according to Marsh’s Mercer QuickPulse Survey, published Aug. 31 and fielded among 1,001 U.S. organizations in mid-July.
“Economic uncertainty is top of mind for employers this year, and compensation dollars are tight,” said Tauseef Rahman, Marsh’s U.S. workforce reward solutions leader, in the release.
In my analysis, the gap shows up fast once you run that budget against prices. A 3.2% raise on $67,635 is $2,164, while keeping pace with 3.4% inflation takes $2,300.
Related: Ramit Sethi’s 87% rule is why big earners still feel broke
You finish $135 behind before you’ve spent a dollar.
The official measure already shows it happening. Real average hourly earnings, which adjust pay for consumer prices, fell 0.3% over the 12 months through August, the Bureau of Labor Statistics reported Sept. 11.
Energy did most of the damage, rising 16.3% over the year, while shelter rose 3.0% and food 2.7%, per the agency’s August consumer price index release.
Sethi’s $5,000 negotiating rule, run through the math
Sethi frames his advice in dollars instead of percentages. His fixed-cost rule, which I covered in September, explains why high earners still feel broke, and this one is about growing the top line.
“$5,000 or even $10,000 a year might sound like a lot to you, but it’s a drop in the bucket for most companies,” he wrote in the raise guide on his website, last updated July 29, 2025.
The same page sells his Road to $100K memberships, priced at $30 to $49 a month, which is worth knowing when negotiation advice arrives attached to a course catalog.
He argues a $5,000 bump compounds over a career once it’s invested. “If you invest that raise every year, it could grow to over $1.3 million by the time you retire, assuming an 8% return,” he wrote.
That checks out on his assumptions. Investing $5,000 a year at 8% reaches $1,295,283 after 40 years, by TheStreet’s calculation, and clears $1.3 million in year 41.
Two caveats belong next to it. At a 7% return, the same 40 years produce $998,176.
And four decades out, $1,295,283 is worth about $340,050 in today’s money if inflation holds at the current 3.4%.
The ask itself is the more useful number. On average pay of $67,635, $5,000 is a 7.4% raise, or 2.31 times what employers have budgeted.
Where the money goes next is a separate decision, and Sethi has an automation system most people skip.
Your raise by the numbers
2027 merit increase budget: 3.2%, with total salary increases at 3.5%
Consumer price inflation, 12 months through August: 3.4%
Real average hourly earnings, 12 months through August: down 0.3%
Average hourly earnings, September: $37.81, up 3.0% over the year
Wage growth for job stayers: 3.6%, versus 5.0% for job switchers (August)
Job openings, August: 7.1 million, with a 3.3% hires rate and a 1.9% quits rate
Sources: Marsh’s Mercer QuickPulse Survey, Aug. 31, 2026; Bureau of Labor Statistics CPI, Real Earnings, Employment Situation and JOLTS releases; Atlanta Fed Wage Growth Tracker, data through August 2026.
Job switchers still out-earn people who stay put
Leaving has been the reliable way to beat a 3% review, and it still works by a measurable margin.
Wage growth for workers who changed jobs ran 5.0% in August, up from 4.4% in July, while workers who stayed put held at 3.6%, according to the Atlanta Fed’s Wage Growth Tracker, a three-month moving average updated Sept. 10.
On $67,635, that 1.4-point spread is worth $947 in the first year, and it repeats every year after because it’s built into your base.
The hard part is getting through the door. Hires ran 5.2 million in August, a 3.3% rate, and quits ran 3.1 million, a 1.9% rate, per the Job Openings and Labor Turnover Survey released Sept. 29.
Openings stood at 7.1 million in August, roughly matching the 7.1 million people the BLS counted as unemployed in September.
Who you are when you knock matters. The wage premium for job switchers “rebounded significantly through first quarter 2026,” Anton Cheremukhin and Theresa Rincker of the Federal Reserve Bank of Dallas wrote in a May 26 analysis.
They also found that “firms are bypassing the unemployed to hire from within the ranks of the already employed.”
Hiring out of unemployment has “consistently failed to keep pace with either prepandemic baseline,” they wrote. That leaves the bottom rung of the ladder cut off from the ones above it.
How to prepare for your 2027 salary review
Price your own review first. Multiply your salary by 0.032 and compare the result with what your household spends on energy, rent and groceries.
Then rehearse. TheStreet has covered how to ask when prices are rising, and the mechanics haven’t changed.
Ask for a dollar figure. A request for 3.5% invites a counteroffer inside the budget, while a request for $5,000 forces a conversation about where the money comes from.
Move before the budget closes. Mercer fielded its survey in mid-July for the following year, so the pool you’re negotiating against is often set months before your review.
Speak up. “If you don’t bring up the topic of compensation, most managers will assume you’re satisfied with what you’re earning,” Sethi wrote on the same page.
If you’re employed and weighing a move, the Atlanta Fed data put the switching premium at 1.4 points. If you’re out of work, the Dallas Fed research suggests this market treats you differently, so budget for a longer search.
September’s inflation and real earnings data land Oct. 14. If prices hold near 3.4% while employers hold near 3.2%, the 2027 review season arrives with its arithmetic already settled.
The people who beat it will be the ones who walk in with a number, and who treat the raise as part of a bigger plan for their money.
Related: Ramit Sethi’s 5 best financial insights for building a rich life