As the U.S. economy continues to evolve, many organizations are assessing how broader economic conditions may influence wages and employment costs in the coming year. Although the labor market has undergone significant shifts over the past five years—particularly in response to the COVID-19 pandemic—many of its effects remain relevant today. Various factors, including market demand, inflation, and policy changes, will shape wage trends in 2025. While economic forecasts suggest a generally stable outlook, labor market conditions remain a key area of focus for both employers and employees.
As a nonprofit leader, you may at times struggle to keep pace with the national average income, which makes even minor shifts in pay and labor supply loom large. Although wages tend to be the go-to measure of job quality and stability, research shows that, even in the current market, many employees are expressing an interest in other factors, such as benefits, flexibility, quality of life considerations, and organizational values and impact. As you look ahead and prepare for the next few financial quarters, it could be a good idea to explore the overall economic landscape and use this information to set your organizational plan and goals.
Wage trends and projections
Although projections vary somewhat, the range of projected wage increases in the United States sits between 3.7% to 4.1%, a slight downturn from 2024. The leading factors cited by experts point to cooling demand for new workers, reflecting adjustments following several years of pandemic-related labor market fluctuations. Between 2020 and 2024, the many shocks to the economy led to radical increases in demand for workers. While the labor supply remains consistent, shifts in market demand have influenced employment dynamics and wage negotiations.
This is also reflected in hiring, with only 36% of organizations reporting that they find it difficult to attract talent to backfill departures or hire for new roles. This number is more in line with pre-pandemic expectations, and could be good news if you are hoping to expand your team or you are dealing with persistent staff churn. If current trends continue, employers may place greater emphasis on retention and minimizing job turnover.
Other trends to watch
Although wages are always top of mind for employees and employers, there are also other forms of compensation and quality of life considerations that your team considers important. Here are some key trends that could impact the labor market:
Rising healthcare costs
Healthcare costs, projected to increase by 10.2% in 2025, remain a significant consideration for organizations of all sizes. This has created greater pressure on employers to identify ways to cut costs without sacrificing the benefits their employees depend on. Alternative pricing structures, renegotiations of plans, and exploring other means to improve employee health and well-being are all approaches organizations are taking to head off this issue.
Pay transparency
In order to combat pay discrimination, a number of states and local governments have enacted transparency laws. Although the laws differ greatly, they are all aimed at giving job applicants and employees direct insight into the pay range they can expect from a given role. As with other pieces of legislation, this could result in a broader trend as organizations begin to feel that in order to remain competitive in the hiring market they must adhere to the demands for pay transparency.
Remote and hybrid work
One feature of the pandemic economy that persists is the move towards hybrid and remote work. While some organizations and government agencies have reinstated full-time in-office policies, surveys indicate that a portion of the workforce prefers to retain remote or hybrid options, with some willing to accept lower pay in exchange for flexibility. One survey showed that 40% of remote workers would be willing to take some form of a pay cut to stay remote, and 9% would be willing to take a 20% cut.
Risk factors
Despite the projected stability, the economic situation could shift rapidly, potentially impacting your organization’s mission and goals. Here are some of the reasons the current stability might not last:
Inflation
Stability in the economy hasn’t resulted in lower inflation or a reduced cost of living. Studies show as much as 50% of all employees are struggling to pay their bills and avoid excessive debt. Although wages are increasing, these increases are only slightly above inflation. For many employees, these trends mean that they may need to work multiple jobs, excessive hours, and find other ways to cut costs.
Debt
The average amount of debt held by Americans continues to rise, taking up a larger and larger percentage of the economy. Although the debt service ratio is lower than past recession cycles, the fact that it is being driven by essential expenditures like housing and groceries indicates that many lack discretionary spending, making them more vulnerable to price shocks.
Changes in international trade
Although the imposition of a new trade policy does not necessarily lead to radical shifts in domestic supply, there is some concern that the Trump administration’s new tariffs could lead to an increase in prices for essential goods. The Federal Reserve’s unwillingness to cut interest rates in 2025 is partially in response to the potential price increases brought on by tariffs. As wage growth moderates, rising costs may continue to be a financial concern for many employees.
As organizations prepare for the year ahead, understanding the evolving labor market, wage trends, and workforce priorities will be essential for effective planning. While wage growth appears to be stabilizing, factors such as inflation, healthcare costs, and shifting workplace expectations continue to shape employment dynamics. Nonprofit leaders and employers across sectors will need to balance financial constraints with employee retention strategies, competitive compensation, and workplace flexibility. By staying informed about these trends and adapting to emerging challenges, organizations can position themselves to attract and retain talent while maintaining long-term sustainability.
ABOUT US
For more than 40 years, 501(c) Services has been a leader in offering solutions for unemployment costs, claims management, and HR support to nonprofit organizations. Two of our most popular programs are the 501(c) Agencies Trust and 501(c) HR Services. We understand the importance of compliance and accuracy and are committed to providing our clients with customized plans that fit their needs.
Contact us today to see if your organization could benefit from our services.
Are you already working with us and need assistance with an HR or unemployment issue? Contact us here.
The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
(Image Credit: Canva.com)
