More than a third of full-time American workers have had their pay cut because of the coronavirus pandemic, according to the latest MagnifyMoney survey.
MagnifyMoney surveyed nearly 1,000 full-time American workers to gain a better understanding of pay cuts, pay raises and bonuses over the past year — and in the next year. The news isn’t all bleak, though. While many workers experienced a pay cut, more than half of full-time workers have received a pay raise in the past year — even though 8% fewer workers received one than in the previous year.
As many would suspect, a large amount of pay cuts in the past year were pandemic-related. Of the 37% of full-time workers that experienced pay cuts in the past year, the cuts for 34% of those workers were because of the coronavirus pandemic.
Men and women experienced pandemic pay cuts at similar rates, but men were more likely than women to report having their original pay rate restored. Overall, 52% of Americans working full time who experienced a pay cut said their pay hasn’t yet been restored.
There was a significant age gap regarding pay cuts, though. Millennials (ages 24 to 39) were the most likely generation to experience a pay cut because of the pandemic at 38%, compared with:
There is some good news for millennials, though, as 53% had their pay restored after it was cut.
“It’s definitely encouraging to hear that millennials are likely to have their pay restored after a pay cut, as a lengthy cut in pay can cripple one of the more financially vulnerable generations,” said Sarah Berger, MagnifyMoney’s millennial finance columnist.
“Many millennials are struggling with crushing student loan debt and a weak job market at a time when many are also likely considering making serious financial decisions, such as buying a home, getting married and having children,” she added. “It’s essential for millennials and other young generations to be on solid financial footing before they make these big purchases.”
More than half of full-time workers received a pay raise this year. This is good, but it’s a notable drop from the previous year.
MagnifyMoney asked full-time workers some of the same questions about their salaries in a 2019 survey and found that 59% of respondents received a pay raise, versus 54% in this year’s edition — a decrease of 8%.
Of the Americans working full time who received a pay raise in the past year, nearly half (46%) said they got it via their current job, while 8% said they got it when they switched jobs.
As shown in the graphic above, more men (58%) than women (48%) received raises in the past year. Men also received more raises in our 2019 report, but to an even greater extent — 64% of men, versus 52% of women.
Millennials were more likely than Gen Xers and baby boomers to receive pay raises. However, while millennials are often accused of job hopping, only 12% got a pay bump by switching jobs.
One in 2 of those who received a raise were surprised by it, while an additional 1 in 4 asked for it. Plus, just over 1 in 4 (26%) received a cost-of-living increase, but they weren’t surprised to receive it.
Men who got raises were more likely than women (27% versus 21%) to ask for them.
As well, nearly half (49%) of those who got a raise also got a promotion. Breaking it down by gender, 54% of men who received raises were also promoted, versus just 42% of women.
More than half of those whose pay increased in 2020 put their newly increased income to good use by upping their retirement contributions.
This was lower than last year’s report, when 62% boosted their retirement contributions — a 10% decrease.
Men who got raises were slightly more likely than women (58% versus 52%) to increase their retirement contributions. More millennials (55%) and Gen Zers (56%) increased their retirement savings, but baby boomers (40%) held back a bit more.
Consistent retirement contributions are key to saving successfully for retirement.
“Dialing up your retirement contributions on a regular cadence will only help you in the long run,” according to Berger. The more you contribute, the more you can earn in compounding returns.
Berger recommends automating retirement savings contributions to keep the process simple and to continuously make progress. Many retirement plans allow you to select an automatic escalation setting in which your contributions are increased by a certain percentage point every year.
“This is a fool-proof way to make sure you are consistently increasing your contributions,” she said.
Looking forward to 2021, 39% of full-time workers are optimistic they’ll receive a pay raise in the next year. As positive as these numbers seem, though, this is still a negative shift from the previous year. The percentage of full-time workers who think they’ll get a pay raise next year dropped 17%, from 47% in 2019 to 39% in 2020.
Men (43%) are more likely than women (32%) to believe they’ll receive a raise in the near future. Similarly large gaps exist among the generations as well. The following think they’ll receive raises in the next year:
Twenty-three percent of full-time workers received — or expect to receive — a bonus for the amount they envisioned. While some workers (35%) reported they don’t typically receive bonuses, 15% of workers who typically get bonuses won’t be receiving one this year specifically because of the pandemic.
Here’s a further breakdown:
More than 4 in 10 (42%) women said they don’t typically receive bonuses, versus 3 in 10 men. But of those who do typically receive them but won’t be getting one because of the pandemic this year, there was a more even split (15% of men, versus 16% of women). When it comes to the different generations, millennials (25%) were the most likely to receive or expect to receive their typical bonus, followed by:
“The coronavirus pandemic has crippled many businesses in the U.S., many of which have been forced to close for good,” Berger said. “Understandably, many companies are cutting back on bonuses in 2020.”
MagnifyMoney commissioned Qualtrics to conduct an online survey of 984 Americans who are currently employed full time. The survey was fielded Nov. 6-11, 2020.
Generations are defined as the following ages:
The survey also included responses from members of Generation Z (18 to 23) and the silent generation (75 and older). Due to the low sample size among both age groups, their responses were factored into the overall percentages but excluded from the generational breakdowns.