US Salary Budgets Hold Steady at 3.5% Amid Shifting AI Demands

The Conference Board’s latest survey highlights a widening gap between rigid pay models and the evolving needs of the modern workforce. With only 0.5% of budgets allocated for flexibility—covering promotions, equity, and retention—employers are forced into precise, high-stakes decision-making. The pressure is particularly acute regarding artificial intelligence, as 38% of organizations now cite AI and machine-learning proficiency as the primary driver for salary adjustments, eclipsing all other skill categories.

Despite this shift, formal compensation systems remain surprisingly stagnant. Nearly two-thirds of firms continue to base salary ranges on job titles rather than individual skill sets, with only a small fraction of companies creating specific funding for employees who acquire in-demand capabilities. Diana Scott, US Human Capital Center Leader at The Conference Board, noted that the compensation landscape is far from static. She suggests that to drive future growth, firms must move away from across-the-board raises and instead focus on rewarding performance and critical technical fluency.

While headcount projections remain relatively stable—with 31% of companies expecting growth compared to 9% planning reductions—the internal composition of those teams is changing. Organizations are aggressively automating legacy tasks and restructuring roles. This transformation requires a dual-track approach to talent: leaders must recruit for AI proficiency while simultaneously valuing human-centric skills like management and data analytics to ensure that technology translates into tangible business results.