Here’s How Much Workers Are Demanding for a New Job

Average reservation wage hits record high

Kathryn Mayer By Kathryn Mayer August 23, 2023

​Employers might be eying smaller raises than they have in the past couple of years, but don't tell that to employees: Job seekers are expecting record-high offers.

Workers' average reservation wage—the lowest salary employees say they would take for a new job—has risen to $78,645, according to new data out from the Federal Reserve Bank of New York. That's an 8 percent jump from July 2022's measure of $72,873 and the highest reading ever measured by the bank.

Salary expectations are even higher among workers with a college degree—their reservation wage now sits at nearly six figures at $98,600—compared with an average of $63,300 for those who don't have a degree, according to the bank's Survey of Consumer Expectations Labor Market Survey. Men have higher pay expectations than women—the average reservation wage for men is $91,048, compared with just $66,068 for women.

The survey results indicate that employers might have to keep up with wages to satisfy confident employees and job seekers, even as many of them consider tightening their purse strings a bit next year, said Lexi Clarke, chief people officer at Payscale, a Seattle-based compensation software firm.

"We are seeing a bit of a mismatch between employer plans and employee expectations," she said. "With inflation waning and the labor market cooling compared to the last few years, some employers want to start reining in pay increases. On the other hand, employee paychecks are simply not going as far, as food, housing and health care costs have not abated."

The Federal Reserve Bank of New York's survey finds that the average full-time offer wage received rose sharply to $69,475—a steep 14 percent hike from the previous year's average of $60,764, but still lower than employee expectations.

Clarke said it's not surprising that the reservation wage has climbed year-over-year given "a pattern of employees expecting more from their employers, for a combination of reasons."

Higher Employee Expectations

The demand for higher wages comes as high inflation, evolving employee priorities and a tight labor market have pushed employees to demand higher salaries from their employers. That's especially true for workers who switch jobs, as it often allows them a bigger payday. According to data from the Federal Reserve Bank of Atlanta, as of July, the typical job switcher earned 6.4 percent more than they had 12 months before, compared to those who stayed with their employer and saw annual raises of 5.7 percent.

Meanwhile, a massive survey of more than 32,000 workers this spring from the ADP Research Institute found that an overwhelming majority of workers expect a bigger payday from their employers, and they may be ready to go to another job if they don't get it.

"While there is worker confidence that their current employers will in fact raise their pay, many workers also believe they'll be able to get that pay raise elsewhere if not from their current employer," Nela Richardson, ADP's chief economist, told SHRM Online in April.

Employers have largely obliged when it comes to employees' demands. Pay has been on the rise, with employers shelling out some of the biggest salaries and pay raises in years.

However, there are signs the labor market—and the pay raise trend—is cooling. U.S. employers added 187,000 jobs in July, the U.S. Labor Department reported earlier this month, the lowest level in two years as demand for workers begins to regress.

A report by WTW, released in late June, predicted that employers are budgeting an average increase of 4 percent in 2024—down from the actual increase of 4.4 percent in 2023 and the 4.2 percent increase in 2022. Payscale, meanwhile, found that employers are budgeting for 3.8 percent pay increases next year—down slightly from this year's average 4 percent bump. It also found that while more than three-fourths of U.S. companies plan to increase salaries in 2024 at the same level or higher than this year, according to the company's Salary Budget Survey, the percentage of organizations expecting to lower their salary-increase budgets in 2024 has risen to 22 percent from 9 percent last year.

Given that employee salary expectations continue to increase, Clarke recommends employers prioritize ensuring that compensation is fair and competitive.

"If you can't meet employees' or candidates' base salary expectations, consider what enticing fringe benefits you can offer, like equity in the company or the freedom to work remotely," she said.



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