Why It’s Getting Harder to Negotiate Your Salary
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Here's your money briefing for Friday, August 9th. I'm J.R. Whelan for The Wall Street Journal. Remember the great resignation when lots of people up and quit and switched jobs? It was pretty easy to land a pay increase, and a pretty big one at that. But now that the labor market is cooling, so are the prospects for a sizable raise.
Where the market is really shifting a lot in terms of money is with new hires. For instance, from a survey that ZipRecruiter did, not even 60% of people who switched to a new job recently were getting more money for that job.
We'll talk to WSJ Careers and Workplace Deputy Bureau Chief Vanessa Furmans about what that means if you want to negotiate your salary after the break.
Listen at schwab.com slash washingtonwise.
Your next pay raise is likely to be smaller than you expected. Wall Street Journal editor Vanessa Furmans joins me. Vanessa, just a couple of years ago, many companies said they were boosting their budgets to be able to pay out higher salaries and bonuses. How have things changed?
Well, the whole job market has just really settled down quite a bit.
How did the labor market change since the Great Resignation and what does that mean for raises?
Two years ago, companies were scrambling to find workers. They thought they were going to have this ongoing digital boom from the pandemic. And so they were overhiring, actually, and estimating that this growth would continue. And they were also scrambling for workers. It was a shortage of workers. And that has all really settled down. So people now are no longer leaving their jobs like they used to for presumably better jobs. And companies have really slowed down the hiring. And that means the that they don't have to offer the same incentives and more money to lure workers. And they also don't have to pay bigger raises to keep workers to stay.
You track the numbers behind this trend. What'd you find out?
Where the market is really shifting a lot in terms of money is with new hires. Because as we know, once you are in a job, you earn a salary, those salaries don't tend to go back down. It's a question of managing the raises. And that's one percentage point here, two percentage points there, or working with... freezing or holding bonuses steady or even cutting the bonus.
Why are new hires no longer seeing the same salary bumps they did two years ago?
But when someone is coming into a job for the first time, for instance, from a survey that ZipRecruiter did, not even 60% of people who switched to a new job recently were getting more money for that job. And back at the end of 2023, at least 70% of people were getting a better salary.
We've seen indications in the past few jobs reports that the labor market is cooling. How is that affecting how managers are setting pay and raises?
But they're being more judicious with those bonuses and those merit raises. And they may be just simply offering less money than they were offering when they were advertising for the same job two years ago. And we're seeing that in those fields that were really in high demand, like technology, finance. That's all kind of slowed down.
What other steps are some companies taking to reset pay rates?
Some companies that have multiple offices in different cities and even countries might be looking to place people who were previously in a high-cost city or high-cost country. They might be trying to fill that position as it opens up in a lower-cost city. We spoke with one CEO who referred to it pretty bluntly as geographic arbitrage.
Overseas where it might be a cheaper place to live or lower taxes for the company?
Right. And even here in the U.S., you can see there are huge cost-of-living differentials between cities. San Francisco or New York versus, say, a Dallas or even a Florida.
In what fields have we seen the steepest pay drops?
For new hires, you're seeing it in some professional services jobs such as finance. We have some data from the payroll and benefits company Gusto, and they showed finance in particular, the pay advertised for new hires across the finance sector is down 9% since last year.
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