How Companies Are Quietly Lowering Salaries
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Here's your money briefing for Wednesday, September 11th. I'm J.R. Whelan for The Wall Street Journal. Over the past several years, the red-hot labor market forced managers to raise salaries to recruit and retain employees. But now the labor market has cooled. And companies are quietly reducing salaries.
This shows that the balance of power has shifted back to employers and companies after a couple of years where the balance of power was more on the job seeker side, where they could command a lot more and get a lot more.
We'll talk to Wall Street Journal reporter Ray Smith after the break.
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After pay for many white-collar positions fell over the last year, now salaries for new hires in blue-collar positions are also coming down. Wall Street Journal reporter Ray Smith joins me. Ray, bring us up to date. Why was pay for many white-collar salaries reduced?
It was reduced primarily because they had gotten out of control, some would say, post-pandemic when there was over-hiring.
What trend is driving companies to quietly reduce salaries for new hires?
So this is almost like a pay reset, some would say a return to normal for pay, which had gotten overheated when the job market was tighter and hotter.
In what fields are we seeing this pay reset for blue-collar workers?
We're seeing it in industries such as food and manufacturing. And that's according to ZipRecruiter, who did an analysis of many of their job postings, where they found blue-collar sectors like food, manufacturing, even transportation, those all registered drops in average posted pay.
Why those fields?
mostly because they had seen declines in hiring after they had gone through a period of overhiring and strong demand for those kinds of workers. That demand has now been satisfied, and so there's less opportunity to hire and also to pay these new hires as much money.
By how much are these starting salaries coming down?
It depends on what sector you're looking at. People told us they've seen job postings where the salary might have been between $175,000 and $200,000 a year ago, now being advertised for tens of thousands of dollars less. According to ZipRecruiter, we saw the biggest decline in retail, where average wages advertised for new hires is down 55.9%. We also saw drops in pay of as much as 24% for agriculture and 17% for manufacturing. We spoke to a McDonald's franchisee who has restaurants in Ohio, Pennsylvania, and West Virginia. He starts his hourly workers at $13. an hour. And now he's pressuring his managers to see if they can reduce that to $12 an hour. His rationale is labor expenses at the locations there have exceeded his food costs.
And that's something he hadn't seen in his 24 years with the company.
How are employers finding a balance between offering job candidates a lower salary but still attracting people with the experience that they're looking for?
Companies are looking to attract people they think are coachable, people who can be paid less than industry veterans, but they can learn quickly and they can be coached on how to do those roles.
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