US President Joe Biden announced an average pay raise of 2% for federal civilian employees, effective January 1, 2025. Meanwhile, across-the-board pay is set to grow by 1.7% for all federal workers. The Biden Administration also announced locality-based average pay hikes of 0.3%. Although inflation has considerably cooled from record-highs of 7% in 2021 to 2.9% for the 12 months ending July 2024, the pay raise might not be enough to keep up with elevated living costs. Furthermore, the hike is much lower than the 4.6% raise at the end of 2022 and 5.2% at the end of last year. The 2% hike for 2025 is also less than what private sector employees received. Bureau of Labor Statistics data revealed that the average worker's weekly wage for July jumped 3.3% year over year.
President Biden highlighted the new pay rates will make federal jobs lucrative while being fiscally responsible. "We must attract, recruit, and retain a skilled workforce with fair compensation in order to keep our Government running, deliver services, and meet our Nation's challenges today and tomorrow," he said. "This alternative pay plan decision will continue to allow the Federal Government to employ a well‑qualified Federal workforce on behalf of the American people, acknowledging wage growth in the labour market and fiscal constraints." Growing optimism around September rate cuts by the US Federal Reserve as it approaches its 2% inflation target could mean further financial relief for US workers as living costs gradually normalise.
