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You’re Hired! But For Less Money
It seemed like a great job offer, especially in today’s tightening labor market. But that was before the hiring manager began to talk about comp.
Welcome to a new, harsh reality in today’s hiring market: jobs for less. The latest data shows that for job seekers, compensation has dropped from last year: 20,000 jobs on ZipRecruiter.com average lower pay than the prior year, and data from Gusto shows that the same roles are paying 5% less than they did in 2022. Some managers, struggling to find the new talent their firm needs, say they’re increasingly hamstrung by budget limitations.
This is a highly unusual turn of events, not to mention a striking contrast to the huge hikes offered to new hires two years ago. Even in normal times, hire pay typically trends slowly upward, in line with overall compensation figures. The reasons for the dip are clear. “Last year was a perfect storm,” says compensation expert Tom McMullen, senior client partner in the ESG and Inclusive Rewards practice at Korn Ferry: high inflation, low unemployment, the tail of the Great Resignation, and an imbalance of labor supply and demand that pushed wages upward. “Now we’re seeing a tempering,” he observes. In some fields, layoffs continue and new hire rates are noticeably lower.
To be sure, hourly workers are still commanding high salaries due to labor shortages, but salaried workers are experiencing a dip in most cases. HR professionals and some key tech roles, for example, were highly sought after during the pandemic; two years later, they were among the first to undergo cuts; today, they often offer 60 to 80% of their previous compensation. That’s a tough pill to swallow, says Jacob Zabkowicz, vice president and general manager for global RPO at Korn Ferry, but it is what it is. “Candidates need to be in tune with the marketplace,” he says.
Experts are concerned that the lower starting pay will topple dominos that ultimately widen pay gaps for women and diverse populations. That’s because these groups often accept lower pay to begin with and tend to struggle to negotiate terms, says Alina Polonskaia, global leader in the DE&I Consulting practice at Korn Ferry. “When you multiply that across millions of employees, we’re risking a big ripple effect.”
McMullen notes that current job seekers might not know that start pay is down. He advises offering compensation that’s competitive enough to get talent through the door, and creating overall packages that lean into the unique strengths of the company. For example, a global company might highlight international career opportunities; a firm with strong training might emphasize career-development opportunities. Firms can also consider offering perks that align well with the company’s culture, such as four-day workweeks.
Experts say that in the long run, this recalibration of new-hire pay may be beneficial—and that it signals a healthier job market following a period of rapid wage inflation. And the last few years provided workers with an important learning opportunity: grabbing the highest-paying job does not necessarily correlate with job security, because those are often the first jobs to get trimmed in layoffs. “You don’t want to be overpaid,” says Radhika Papandreou, sector lead in the Travel, Hospitality, and Leisure practice at Korn Ferry. “Yes, you want to be paid more, but within the band of reasonable compensation for your role.”
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