Experts say that nearly half of companies are implementing "peanut butter" salary increases, and it will take time for salary levels to recover.

Source: Lu ShaoJi—Getty Images

Employees who have recently achieved excellent performance reviews and are eagerly expecting significant raises may face a harsh reality: by 2026, many business owners will no longer reward employees based on performance but instead plan to give all employees a uniform, modest “peanut butter” raise. Worryingly, this trend last appeared during one of the most turbulent economic periods in history.

PayScale’s Chief Compensation Strategist Ruth Thomas told Fortune magazine, “This term has recently become popular online, but it’s not a new phenomenon. When the economy is unstable and wage inflation is low, ‘peanut butter’ raises tend to become common. The last time we saw this was during the ‘Great Recession’ following the 2008 financial crisis.”

Thomas said that during that dark period, when both the real estate and job markets were sluggish, companies maintained their salary increase budgets at around 3%, similar to the approximately 3.5% predicted in PayScale’s latest report for this year.

Similar to the “Great Recession,” about 44% of employers plan to implement uniform, across-the-board raises in 2026, replacing performance-based pay. About 16% of companies will adopt this “peanut butter” approach for the first time: 9% already use this strategy, and another 18% are considering implementing it this year.

The compensation strategist explained that several market conditions are similar behind the resurgence of “peanut butter” raises now and in 2008. In both periods, the labor market was unstable, corporate salary budgets were constrained, and wage inflation was low. When the labor market tilts in favor of employers, “peanut butter” raises are more likely to occur, but Thomas also warned management not to overdo it.

She further pointed out, “Obviously, a reduced compensation budget means smaller individual raises, and a lack of differentiation among colleagues, which can likely dampen employee motivation. Although the labor market is currently employer-driven, companies still want to retain top talent. High performers expect their contributions to be rewarded in some way, which could be a challenge for many companies.”

Similarities Between the 2026 and 2008 Job Markets

Job seekers and current employees are experiencing a tough labor market: hiring has slowed, layoffs are increasing, and salary increases are unsatisfactory.

Looking ahead to the next year, the outlook is bleak; looking back, it’s a déjà vu of past frustrations.

According to 2025 data from HR consulting firm Challenger, Gray & Christmas, from January to early December last year, U.S. companies announced 1.1 million layoffs. This was the sixth time since 1993 that this number exceeded one million. Notably, several other recession years (including 2020, 2009, and 2001) also saw layoffs surpassing the 2025 high, as years of economic hardship destroyed the careers of millions across various industries.

Additionally, a 2025 study by the Federal Reserve Bank of New York found that Americans’ confidence in finding new jobs has fallen to its lowest level since at least 2013. That year marked the post-Great Recession “jobless recovery.” The probability of finding a new job after unemployment dropped to 44.9%, the lowest since the Fed began tracking this data over a decade ago.

Even those who manage to find work after months or years now face the reality of significant cuts to their salary budgets.

Uncertainty Spurs Two-Thirds of Employers to Cut Raise Budgets

According to a 2025 report from Willis Towers Watson, the average salary increase budget for U.S. companies this year remains at 3.5%. However, a considerable number of companies plan to cut their budgets. Nearly one-third intend to reduce their raise budgets compared to last year, citing concerns about potential recession, declining financial performance, and a desire to better control costs.

Changes in the economy and labor market have driven the re-emergence of “peanut butter” raises in many American companies. Similar to the “Great Recession,” employers remain cautious about future prospects.

In 2025, PayScale’s Chief Human Resources Officer Lexi Clark told Fortune magazine that tariffs and economic uncertainties are forcing business owners to stay alert and cut their raise budgets.

Clark said, “Concerns about the economy have replaced labor competition as the main driver of compensation decisions. 66% of employers cite this as a reason for budget cuts, up 17% from last year.” (Fortune Chinese Edition)

Translator: Liu Jinlong