As interest rates hold steady, inflation lingers and prices stay high, employee compensation is an area companies will have to allocate more towards in the future. Even Federal Reserve Chair Jerome Powell has said he and his team are trying to “make gains” in this area to help lessen inflation’s impact. He and many other financial and economic experts have stressed that wages and compensation in the U.S. must increase for middle-class Americans to build lives in this inflationary market.
For CFOs and finance teams, possibly working with HR to prepare for future compensation raises and packages, new data suggests it may be important to consider the age of an employee and how that will determine their judgment of the compensation they’re offered.
New data from Empower suggests the average American employee deems a salary of $270,214 as the threshold for success. However, wage expectations for younger employees, particularly Gen Z, are astronomical compared to their peers. In workplaces with an unprecedented number of employees from different generations working under one roof, finance leaders need to develop compensation plans to understand how employees of all ages self-quantify their work efforts.
Gen Z’s expectations are high
Gen Z’s compensation expectations are the highest among their older peers. Data suggests younger employees believe $587,797 annually is adequate for success, along with a net worth of $9,469,847. Boomers, the oldest workers in the office, need less than a fifth of that to feel successful. They’ve deemed a salary of $99,874 and a net worth of $1,049,172 sufficient for success.
Young people, who have previously said they would take a job they didn’t want for higher pay, likely feel the pressure of rising costs impacting their personal and professional outlooks. Though the number seems high — even higher than the average CFO salary — lives depicted in entertainment and on social media may have sold them a dream that without a high six-figure salary would be unattainable.
Success outside of money
Despite the desire for high salaries, most Americans believe there are other measures of success outside of finance. Only 27% said wealth was the highest measure of success. More than half (59%) said happiness, while over a third (35%) said financial success is the ability to have the free time to pursue personal passions. Physical well-being, an area many CFOs credit for their success, was also deemed a top success metric by 35% of respondents.
To get there, survey respondents define success as a “factor of four,” combining key elements that are both controllable and non-controllable. Over eight in 10 (84%) say the most important factor is hard work, another area where CFOs have highlighted common denominators of success. Talent (65%), who you know (55%) and luck and circumstance (51%) were also considerations.
Expectations of success
Confidence in achieving success is low, with less than half (47%) saying they believe they will never achieve the level of success they are looking for. Half (50%) say they will be better off than their parents, an idea unprecedented in American history.
Barriers to success are extensive and go beyond factors employers can control. Poor financial management and a lack of financial literacy are areas outside of compensation many employees feel the consequences of. Over a third (35%) cite income stability as a barrier to success. Other reasons include overspending and not budgeting effectively (37%), debt (36%) and a lack of savings (35%).
Financial literacy issues remain stagnant, with a fifth (20%) saying they lack knowledge about personal financial management. Nearly three in 10 (28%) say they don’t have the ability to set clear financial goals, and over a quarter (26%) say procrastination or delaying financial planning or decision-making is a contributing issue.
Broken down generationally, younger people are more confident in their ability to achieve success. Gen Z is the highest at 71%, followed by Millennials (70%), Gen X (53%) and Baby Boomers (45%)
