“It’s a term that’s gone quite viral at the moment, but it’s not a new phenomenon,” Ruth Thomas, chief compensation strategist at Payscale, tells Fortune. “Peanut butter pay increases tend to come into play when you are in an environment of economic volatility and low wage inflation. The last time we really saw this was post the Great Recession, after the financial crisis in 2008 [and] 2009.”
And just like during the Great Recession, many employers—around 44%—plan to roll out one uniform, across-the-board wage bump in 2026 in lieu of merit-based raises. About 16% of organizations are newly implementing these “peanut butter” raises: 9% say they already employ the pay strategy, and another 18% of organizations are considering it this year.
The compensation strategist explains that there are a few overlapping market conditions that allowed peanut butter raises to rise in popularity today and back in 2008. During both eras, there was labor instability among workers, pay budgets were restricted, and wage inflation was low. Peanut butter raises thrive when the pendulum swings to an employer’s market—but Thomas cautions bosses against playing a heavy hand.
“Obviously, smaller pay budgets are going to make pay increases individually smaller, [with a] lack of differentiation amongst colleagues. That will probably be de-motivating,” Thomas continues. “Although we’re in an employer’s labor market, organizations still want to retain their top talent. Top talent are going to seek some type of reward for their input to the organization, and that may be a difficulty for many organizations.”
Job-seekers and staffers are suffering through a difficult labor market: Hiring has slowed, layoffs are steadily streaming in, and wages don’t feel like they’re holding up.
Looking at the year ahead, the picture doesn’t look too pretty—and looking back, there’s some disheartening déjà vu.
Even if job-seekers manage to find a job after months to years of applying, they’re now up against the reality of battered pay budgets.
Changes in the economy and labor market contribute to the ebb and flow of peanut butter raises currently taking hold at many American companies. And just like during the Great Recession, employers are wary of what’s ahead.
