evidence: In April 2022, this space covered why – despite severe talent shortages and the ongoing impact of The Great Resignation – corporate salary increase budgets trailed inflation, and why salary increases move differently from inflation. A year later in mid-2023, salary increases continued to move differently than inflation under changing economic conditions, with salary increases potentially again exceeding inflation for the first time since 2020 (and in a manner keeping with most years of the past two decades). [...] With thanks to analysis by WTW’s Lori Wisper, several factors account for the difference between salary increases and inflation. While inflation and salary increases generally move in the same direction, influencing each other, they are driven by different inputs. Inflation is defined by changes in the cost of a market basket of goods (such as housing, groceries and fuel). Pay, on the other hand, is driven by changes to supply/demand for labor which can be caused by demographic trends, labor participation rates, unemployment levels, technological advances, and growth in productivity. For example, in 1979 – the year of the highest peacetime inflation on record – U.S. inflation was 13.3% but wage increases were a much lower 8.7%. Conversely, U.S. inflation was 1.9% in 2001, but salary increase budgets were much higher - near 4% - in 2001 and 2002. This difference tends to make employees feel advantaged in terms of real spending during low-inflation years and disadvantaged during high-inflation years. Independent of inflation, pay increases generally are expected to remain high as long as unemployment remains low.