Bosses Are Finding Ways to Pay Workers Less

Bosses are quietly trying to reset worker pay levels, saying the era of overpaying for talent is over.

Pay for many white-collar recruits shrank last year , and now wages for new hires in construction, manufacturing, food and other blue-collar sectors appear to be ebbing too, according to an analysis of millions of jobs posted on ZipRecruiter.com .

Job seekers report seeing roles that once offered salaries between $175,000 and $200,000 a year ago now being advertised for tens of thousands of dollars less, a change that has had them rethinking their pay expectations. Companies are also moving job openings to lower-cost cities or offering them as lower-paying contractor roles, recruiters and corporate advisers say.

The push to reset employee salaries reflects a power shift in the cooling hiring market. Employers have more choice of who they can hire, and at what pay level, and are questioning whether they really need star hires when a workhorse will do . Even hourly jobs that were until recently the toughest for employers to fill are being advertised at lower pay than a year ago, as are some professional roles, according to business leaders and recruiters. undefined undefined “A lot of companies are thinking they can get away with paying a cheaper salary because they know us job seekers are desperate,” said Eric Joondeph, 31 years old, who has been looking for a senior customer-experience role for nine months. He has lowered his pay expectations by at least $20,000 a year since he started looking.

Among listings for more than 20,000 different job titles on ZipRecruiter.com this year, sectors including retail, agriculture, transportation and warehousing, manufacturing, and food all registered drops in average posted pay. The biggest was retail, where average wages advertised for new hires is down 55.9%; agriculture is down 24.5% and manufacturing, down 17.3%.

Tom Locke, a McDonald’s franchisee who owns 56 restaurants in Ohio, Pennsylvania and West Virginia, starts hourly workers at $13 an hour, but the signing bonuses and other hiring incentives he offered during the pandemic are gone. He said he is constantly asking his managers if they can reduce hourly wages to $12 an hour.

Labor expenses at Locke’s McDonald’s locations now exceed his food costs—something he said hasn’t happened in his 24 years with the company.

“I want everybody to do well in America, but there’s cost pressures,” he said. “It’s just a constant battle.”

‘Geographic arbitrage is real’

Pay resets continue to ripple through the white-collar world too. Joondeph has been looking for a senior role in customer experience since he was laid off from a customer-experience associate role.

“I’ve seen salaries slowly dropping little by little for roles I’ve been targeting,” he said.

Based in Boise, Idaho, Joondeph said he is struck by the number of jobs he has applied for that now advertise salaries not much higher than $60,000. Many used to advertise with a range between $80,000 and $100,000 in the past six to nine months, he added.

In some cases, companies are looking to attract less experienced, but still coachable, people who can be paid less than industry veterans, corporate advisers say.

Brooke Weddle, a senior partner at McKinsey & Co., said one client recently decided to stop recruiting stars, putting in place a “no more unicorns” hiring strategy, in part, to lower costs. (Unicorns are top performers with specialised skills who can command outsize salaries.)

Other businesses are considering moving jobs overseas, said Weddle, a leader in McKinsey’s group that advises on personnel issues. Instead of hiring data analysts in the U.S., for example, companies want to add people in Mexico and cheaper parts of Europe, like Poland, to save on labor costs.

“Geographic arbitrage is real,” she said.

In the U.S., some Fortune 1000 companies are moving enterprise software jobs from expensive cities such as Chicago and San Francisco to places with a lower cost of living, such as Cincinnati and St. Louis, Mo., said Keith Sims, president of Integrity Resource Management, a recruiting firm based in the Indianapolis area.

Sims, who for 25 years has helped companies recruit professionals who work with software systems like SAP and Oracle , said he hasn’t seen bosses so intent on reining in pay since the recession of 2009.

Salaries for tech jobs working with back-office and core operations business software that paid between $110,000 and $130,000 a year ago now go to less experienced hires for $85,000 to $100,000, he said. Some companies are laying off entire service areas, renaming the division and populating it with new hires at much lower compensation levels.

Hiring managers gain leverage

Overall pay for new hires in white-collar sectors increased this year, after falling in 2023, buoyed by gains in certain corners of the professional world, including law, engineering and healthcare, according to Julia Pollak , ZipRecruiter’s chief economist.

Although some tech roles that require artificial intelligence skills still offer hefty pay, many other tech jobs are advertised at lower salaries than two years ago, according to some Silicon Valley recruiters.

“Most people we interview are seeing lower salaries,” said Jill Hernstat, chief executive of Hernstat & Co., a tech recruiting firm based in the San Francisco Bay Area. “Hiring managers know they are more in control now.”

Other white-collar professions with declining new-hire salaries include finance, down 9.2% in the past year, other professional services, down 2.4% and insurance, down 1.6%, according to Gusto, a payroll and benefits software company with more than 300,000 small and midsize businesses as customers.

Pay adjustments are easing some tensions among colleagues who may have resented how much new hires were making, and the fact that tenured employees’ pay hadn’t kept up, said Tom McMullen , a senior client partner at Korn Ferry , a global organizational consulting firm.

“A lot of leaders wanted this market to cool down because they got themselves into some internal equity messes by paying through the nose for all this hot talent,” he said. “What we’re hearing is, ‘Hey, I don’t have to offer the exorbitant in-hire rates that I was offering.’”

Same work, less pay

Kate Ball was at Amazon .com for eight years, some of them as a senior recruiter, before being laid off in 2023. External recruiters have since repeatedly called her about a contract role there as a senior recruiter. Ball said the job is virtually the same as the one she had once held, but for up to 65% less pay.

Some of her former co-workers who were also laid off have taken lower-paid contract positions with Amazon: “I don’t know anyone that came back on the same package,” said Ball, 44, who has started her own HR advisory practice, Sparkle & Sass Consulting.

As Ball has applied for roles elsewhere, she has noticed some openings get reposted with lower pay ranges than were advertised weeks or months before. She applied for one job, as an employee-experience manager, went through two interview rounds, then heard nothing. A few weeks later, she saw the same job re-advertised, this time at roughly a third less than the six-figure salary she’d been quoted by the recruiter.

It is understandable, Ball said, that companies are reining in pay when they have a greater pick of job candidates than they did a couple of years ago. Still, some tactics could create ill will for employers when they have to compete more intensely for talent again.

“People will take a job now because it pays them and they’re scared, but that’s not going to last forever,” she said.