The Raise You’re Planning Still Won’t Keep Up With Inflation
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Paychecks grew in August, and prices grew faster. The Bureau of Labor Statistics reported this morning that average hourly earnings rose 0.3% from July to August while the Consumer Price Index rose 0.4%. Adjusted for inflation, the average worker’s real hourly pay fell 0.1% for the month.
Weekly pay looks a little better, but hours are driving that improvement, not the hourly rate itself. The average workweek grew 0.3% to 34.4 hours, and that extra time on the clock pushed real weekly earnings up 0.2% for the month.
The year-over-year numbers are where the pattern becomes hard to miss. Average hourly earnings climbed 3.1% over the past year to $37.75, while prices climbed 3.4% over the same period, leaving real hourly earnings down 0.3% from August 2025. This is the second straight month real hourly pay has posted a negative year-over-year reading, following a 0.2% decline in July. June came in flat at 0.0%, so the streak is two months deep, not three, but the direction is the same: pay raises have stopped outrunning prices.
Real weekly earnings are still up 0.3% from a year ago, and again, hours are doing the work wages aren’t. The average workweek is up 0.6% over the year, and that additional time is the entire reason weekly paychecks are ahead of inflation at all. Average weekly earnings now stand at $1,298.60.
Production and nonsupervisory workers, roughly 80% of private payroll employees who aren’t managers, had a flatter month. Their real hourly earnings also fell 0.1% in August; their workweek didn’t change, and their real weekly pay dropped 0.1% as a result. Their specific inflation gauge, the CPI-W, rose 0.5% for the month. Over the year, their real hourly pay is down 0.1% and real weekly pay is up 0.1%.
A 3% raise sounds like progress until you look at what it buys. Right now it functions as a pay cut of roughly three-tenths of a percent, and it has held for two months straight. The only reason weekly paychecks are staying ahead of inflation at all is that people are working more hours. Employers are buying more time at the same real hourly rate, and workers feel that difference the moment they’re the ones staying late for it.
If you’re job hunting, bring your raise minus 3.4% into the negotiation. Anything under that number and you’re moving backward no matter how the offer letter reads, a calculation that matters even more given how few workers are available to fill open roles right now. If you’re a hiring manager, understand that a standard 3% merit increase reads as flat or worse to your team this year. Say that out loud instead of pretending the annual bump is a reward. Candidates comparing offers are already doing this math, and employers who acknowledge it will have an easier conversation than those who don’t.
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DHS Wants to End the 60-Day Cushion for Laid-Off H-1B Workers
The Department of Homeland Security published a proposal Friday to eliminate the 60-day grace period that currently lets H-1B workers and several other visa holders stay in the country after losing their job. Under current rules, a laid-off H-1B worker gets up to 60 days to find a new sponsor or change status. Under the proposal, a worker who stops working for the employer tied to their visa would be considered immediately removable.
The grace period took effect in early 2017 and covers H-1B, E-1, E-2, L-1, O-1, TN, H-1B1, and E-3 visas. DHS says nearly 4,000 workers a year use it to file a new petition after a layoff or resignation, and more than 99% of them hold H-1B visas. The department also reports that between October 1, 2017 and May 20, 2026, USCIS had to evaluate 1.9 million petitions or applications where the grace period might have applied, and it frames ending the rule as a way to cut that administrative load.
DHS argues that employers would respond by filling those same jobs with equally qualified U.S. workers, sponsoring a new foreign worker through the standard I-129 process, or reassigning the work to current employees. FWD.us estimates that about 730,000 H-1B holders live in the U.S. along with 550,000 dependents, and DHS acknowledges some families could be forced to leave. The department’s position, in its own words, is that “the harm of the up to 60-day discretionary grace period outweighs the potential benefit it provides to the impacted aliens and employers, the alien’s dependents, and the community at large.”
This follows a string of H-1B changes already underway in 2026: the visa lottery was replaced with a weighted system favoring higher-paid workers, a court blocked a proposed $100,000 employer fee, and in August the administration floated a $103,265 fee for certain petitions plus a $4,000 biometric fee on extensions for employers with large foreign workforces. The annual cap stays at 65,000 new visas plus 20,000 for advanced-degree holders. Public comments on the grace-period proposal are open for 60 days.
The 4,000-a-year figure is small, and that’s the detail worth sitting with. This rule changes the risk calculation for all 730,000 H-1B workers in the country, because every one of them now has to weigh what a layoff would mean with zero runway to fix it. A candidate on an H-1B who’s currently employed has little reason to leave a stable job for a new one if a rough quarter there means leaving the country. Expect more of those candidates to stay put, and expect the ones who do move to want stronger guarantees before they accept an offer.
I also wouldn’t assume the same jobs land with equally qualified American workers on day one. Some will. Others sit open longer or get absorbed by the people already on staff, the quiet outcome DHS lists third in its own reasoning and the one I’d expect to show up most often in practice. Comments are open for 60 days, so this is a proposal, not a rule yet. If your company employs H-1B workers, this is your window to speak up before it becomes law.
What This Means for Your Hiring and Pay Decisions
Two different pressures are pointing the same direction this week. Real wages are falling even as job openings sit unfilled, and a policy change could make an already tight talent pool harder to retain. Review your comp bands against actual inflation, not last year’s benchmark, and if H-1B talent is part of your workforce, get comfortable with the proposal’s comment process now, before it becomes final.
If you need help building comp packages that compete in this market, or navigating hiring in a tighter talent pool, talk to us about hiring and we’ll help you get it right. And if you’re the one weighing whether your current pay is keeping pace, see what’s open right now and compare the math for yourself.
