Paychecks Lost to Inflation: Real Wages Fell 0.6%, New Employment Cost Index Shows. How to Ask for a Raise That Keeps Up

If your paycheck feels like it buys less than it did a year ago, the government’s own numbers now back you up. The Bureau of Labor Statistics released its quarterly Employment Cost Index this morning, and once you adjust for inflation, the typical worker’s pay went backward over the past year. Here is what the report shows, which jobs fell furthest behind, and how to use these numbers when you ask for your next raise.

What the October 30 report says

The Employment Cost Index for September 2026 tracks what employers spend on pay and benefits for the same set of jobs over time, so it isn’t skewed when lots of high- or low-paid people are hired or let go. For civilian workers, total compensation rose 0.8% in the third quarter, with wages and salaries up 0.7% and benefit costs up 0.9%. Over the full 12 months ending in September, compensation rose 3.4%, wages and salaries rose 3.1%, and benefits rose 3.9%.

A 3.1% raise sounds fine until you put it next to prices. The September Consumer Price Index showed prices up 3.7% over the same 12 months, pushed by a 9.1% jump in gasoline in September alone and a 20.4% rise in energy prices over the year. BLS does the math for you: inflation-adjusted wages and salaries for private-industry workers fell 0.6% over the year, and for state and local government workers they fell 0.5%.

That is a real shift. A year earlier, in September 2025, private-sector wages were growing 3.6% and beating inflation by about 0.6%. In twelve months the typical worker went from getting slightly ahead to slipping slightly behind. Economists polled by Reuters expected roughly this result, which tells you something too: employers aren’t being caught off guard. Modest raises are the plan.

Who fell furthest behind

The averages hide big gaps. In the detailed private-industry wage table, a few groups stand out:

• Sales jobs: wages rose just 1.8% over the year, the weakest of any major occupational group. That is almost two points behind inflation.
• Service occupations (food service, cleaning, personal care and similar work): 2.8%, down from 3.6% a year earlier.
• Professional and related jobs: 3.5%, close to inflation but still a little short.
• Construction, installation and maintenance work in goods-producing industries: 3.9%, one of the few groups roughly keeping pace with prices.

The single biggest divide was union status. Union workers in private industry saw wages rise 4.3% over the year, compared with 3.0% for nonunion workers. Contracts with set annual increases protected union members from the slowdown, while most nonunion workers got whatever their employer’s budget allowed.

Your benefits are costing more, and that matters at raise time

Employer spending on benefits grew faster than pay, at 3.9% for the year. Health benefits for private-industry workers rose 6.4%, more than double the pace of wages. That is one reason companies are tight on raises: every dollar that goes to rising insurance premiums is a dollar that doesn’t reach your paycheck. It also means your own share of premiums may climb in January. If you haven’t picked your 2027 plan yet, our guide to open enrollment and rising health costs walks through how to keep higher premiums from eating your raise.

How to use this report to ask for more

Most raise conversations happen in November and December, when managers lock in next year’s budgets. The ECI gives you a clean, neutral number to work from. Here is how to use it.

1. Reframe “cost of living” as the floor, not the goal

With prices up 3.7% and the typical raise around 3.1%, a standard merit increase now leaves you worse off. Say that plainly and without drama: “Prices rose 3.7% over the past year according to the CPI, so a raise below that is a pay cut in real terms.” Then make it clear you are asking to be paid for performance on top of that floor. We covered how to anchor on inflation in more detail in our piece on using the Social Security cost-of-living increase as your raise benchmark.

2. Compare yourself to your own occupation

Find your occupational group in the BLS table and check how its pay moved. If you work in a field where wages grew 3.5% or more, a 3% offer means your employer is falling behind the market for your role, and you can say so. If you’re in sales or service work where growth was weak, lean harder on your specific results, such as revenue you brought in, customers you kept, or shifts you covered, because the industry average won’t carry your case.

3. Bring a number and a reason

Managers respond better to a specific figure tied to evidence than to a general request. Pick a target, for example 5% to 6% if you’ve taken on more work, and back it with two or three concrete accomplishments from this year. Our step-by-step guide on how to ask for a raise in 2026 has scripts for opening the conversation and handling a first “no.”

4. Ask about the whole package

If base pay is capped by budget, negotiate the things that offset rising costs: a larger employer contribution to your health savings account, a one-time bonus, a commuting or remote-work stipend now that gas prices have jumped, or a guaranteed pay review in six months instead of twelve. Get any promise in writing.

5. Know your market value

The union gap shows what happens when pay increases are negotiated rather than handed down. You don’t need a contract to act on that lesson. Look at current job postings for your role, especially in states that require salary ranges, and know what a competing offer would pay before you sit down. A realistic outside number is the strongest leverage most workers have.

What to watch next

The October inflation report is due November 10, and the next Employment Cost Index comes out January 29, 2027. BLS also noted that starting with that December report, it will update the employment weights behind the index and drop workers’ compensation costs from the benefit figures, so expect small differences when comparing future reports to older ones. If energy prices cool, real wages could turn positive again in early 2027, but that won’t help anyone who locks in a below-inflation raise this winter. For a look at what employers are budgeting, see our 2027 raise forecast.

The bottom line

Today’s report confirms that the average paycheck lost ground to inflation over the past year, and that workers who had negotiated raises did noticeably better than those who didn’t. Use the official numbers, compare them to your own job and results, and ask for a raise that at least keeps up with prices, plus a premium for the work you actually do.