Spending Power Fell in 61% of Big U.S. Metros, and 4 in 10 Workers Think Leaving Is the Surest Raise

Most employees got a raise last year. In most of America's biggest metro areas, it did not leave them better off. That gap between the number on the offer letter and what the paycheck actually buys is now showing up in how workers think about loyalty, and the conclusion many have reached is that the fastest way to a meaningful raise is to walk out the door and come back later.

Raises That Rose on Paper and Fell at the Register

An analysis released October 27 by the Ludwig Institute for Shared Economic Prosperity (LISEP) ranked the 56 largest U.S. metropolitan areas, each with more than a million residents, using 2024 data, the most recent year with complete local figures. It focuses on middle- and lower-income households, and it found spending power fell in 61% of those markets despite nominal wage gains.

The arithmetic is straightforward. Living costs across the 56 metros rose 4.7% in 2024, against an average annual increase of 3.2% since 2005. Median nominal weekly earnings rose 4.3%. After adjusting for living costs, median spending power in those metros fell 1.3%, a steeper decline than the 1% drop nationally. Rent rose 11.7%, childcare costs rose an average of 7.6% and medical care rose 2.9%. The minimum annual living cost for a single adult ranged from $34,400 in Cincinnati to $58,300 in San Jose, and in none of the 56 metros did median weekly earnings cover the living cost for a single adult with one child.

"This analysis reminds us that rising wages, by themselves, don't tell us whether people are actually better off," LISEP chair Gene Ludwig said in the release. For HR leaders, the more practical point is that a single national pay increase lands very differently in Pittsburgh, where LISEP's living cost measure rose 1.3%, than in San Diego, where it rose 7.9%.

The Raise Workers Expect to Get by Leaving

Employees have noticed. Marsh research covered by HR Dive found more than 4 in 10 workers believe they are more likely to get a raise by leaving and rejoining their company than by staying, up from 18% in 2024. Only 31% of employees believed they would be compensated for upskilling. Nearly three-quarters of HR leaders said skills-based pay drives retention, yet only 26% have implemented it.

"Employees are exhausted, they don't believe the system is fair, and the moment the job market improves, they will leave," said Gordon Frost, global rewards leader at Marsh. The same research found workers who feel fairly compensated report being 85% more engaged and 60% more committed, which is the cost side of that cynicism expressed as an upside.

The 2027 budget will not close the gap on its own. Marsh's compensation planning survey of more than 1,000 companies, reported by HR Dive in September, projects base salary merit increases of 3.2% and total increases of 3.5% including promotions and cost-of-living adjustments. "If projections hold, and historically they have, this will mark four consecutive years of moderate compensation increases," said Tauseef Rahman, U.S. workforce reward solutions leader at Marsh. Notably, 64% of companies provided or planned off-cycle salary adjustments in 2027, which tells employees that the money exists for those who push, or threaten to leave.

Health Costs Are Competing for the Same Dollars

The squeeze runs both ways. In the National Alliance of Healthcare Purchaser Coalitions' survey of 408 employers, 83% said healthcare cost increases trade off with wage and salary increases, and 93% expect costs to be passed on to employees. "Healthcare affordability is no longer just a benefits issue; it is a business issue, a workforce issue and a wage issue," said Shawn Gremminger, the Alliance's president and CEO.

Put those findings next to LISEP's and the problem compounds. A 3.5% raise that already trails a 4.7% rise in living costs shrinks further when a higher premium contribution comes out of the same paycheck. As HR Dive noted in its October 28 coverage, housing, childcare and healthcare were the top drivers of cost increases, three line items employers either influence directly through benefits or ignore at their peril.

For HR and total rewards leaders finalizing 2027 merit and renewal decisions, the practical response looks like this:

• Measure real pay, not nominal pay. Compare each employee's raise against local living cost changes and next year's benefits contribution. Anyone whose net position falls is a retention risk regardless of their merit rating.
• Price boomerang hires honestly. If a returning employee would be offered more than an incumbent in the same role, fix the incumbent's pay first. Otherwise you are confirming the belief that leaving is the only way up.
• Use off-cycle budget deliberately. Reserve off-cycle adjustments for compression and market gaps you can name, not just for counteroffers to employees who already have one foot out the door.
• Geo-differentiate where it is defensible. A single national increase overpays in some metros and underpays in others. Use market data by location to decide where the budget actually needs to go.
• Show the total, then explain it. Give employees a statement that places the raise alongside the employer's benefits contribution, and train managers to walk through it rather than just announce a percentage.
• Look at how you buy benefits. If premium increases are eating the raise, compare your current arrangement with pooled options before the cost shift reaches employee paychecks.

The LISEP data describes 2024, and the Marsh projections describe 2027, but employees are living in the gap between them right now. When four in 10 believe quitting is the surest raise, the cheapest retention move left is making staying pay at least as well.