Pay for New Hires Is Shrivelling

Pay for new hires is starting to shrivel after years of hefty salary bumps, requiring workers to reset what financial gains to expect from switching to a new job.

Wages, especially for people who changed jobs, climbed in recent years as companies competed for workers to fill pandemic-induced labor shortages. Now, as the job market cools and businesses become more cautious in their hiring, many companies are paying new recruits less than they did just months ago—in some cases, much less.

Among postings for more than 20,000 job titles on ZipRecruiter’s site this year, the average pay for a majority of roles has declined from last year. Some of the steepest drops have been in technology, transportation and other sectors that experienced frenzied hiring sprees in 2021 and early 2022.

Chanteal Brayboy, 25 years old, has been seeking user-experience design roles since last summer, ever since finishing a design boot camp. At the time, layoffs had just begun to churn through the tech economy.

She’s since applied for more than 2,000 roles, and only gotten calls for a couple interviews. The posted salaries for the jobs she’s interested in, she says, have fallen around $10,000 from those advertised a year ago.

“The market is completely different now, companies know they can pay less,” says Brayboy, who lives in Kalamazoo, Mich.

A sharp reversal

The declines mark a stark turnaround from 2022, when compensation for three-quarters of advertised job titles rose from the year before, according to ZipRecruiter. In a July survey of about 2,000 employers conducted by the online hiring platform, nearly half said they had reduced pay for recent job openings.

Overall wage growth continues and it surpassed inflation in June for the first time in two years as consumer price increases slowed. Still, wage growth peaked last summer and has since declined to 5.7%, according to Labor Department figures.

Because new hires account for less than 4% of all employed workers each month, says Julia Pollak, chief economist at ZipRecruiter, it can take a while for adjustments in their pay to show up in the federal data. The mass layoffs many large companies have conducted lately, particularly in tech, have helped push salaries for new hires downward, says Pollak.

“Other companies no longer face pressure to match these Meta-sized offers,” she says, referring to Facebook’s parent company.

It isn’t just white-collar roles that are feeling the crimp.

During the pandemic, the Unionville, Tenn., pizza restaurant where Valerie Breshears works as a delivery driver boosted wages to $13 an hour to draw new workers. More recently, Breshears discovered from newly hired staff that the restaurant’s starting pay had been lowered to $11 an hour.

“I felt bad for them,” says Breshears, 38. She didn’t tell them she and other workers who had been hired earlier were making more money.

‘Just not as competitive’

In Denver, where retail company Appliance Factory & Mattress Kingdom is based, the company has recently been hiring administrative workers for around $18 an hour. A year ago, the company was paying $20 an hour, says Chief Executive Chuck Ewing.

“There are more people looking for work now, it’s just not as competitive,” he says.

Data from Gusto, a payroll and benefits software company serving more than 300,000 small and midsize businesses, shows that pay rates for new hires are 5% lower than they were for new recruits for the same roles at this time last year. While professional-service roles have been most affected—pay rates for engineers and developers, for example, have dropped 18% in the past year—workers in other industries have also been hit.

More in-demand workers in certain industries continue to get pay bumps, says Gusto economist Luke Pardue. The company’s data shows pay in tourism and construction, for example, has continued to rise.

During the pandemic, the supply chain for workers was “horrifically broken,” says Laurie Chamberlin, the North America head of LHH Recruitment Solutions. Many workers sat on the job-market sidelines, and companies competed furiously to get them through the door.

“There was kind of an auction mentality,” she says. “People were paying extraordinary amounts without a whole lot of negotiating power or long-term view.”

That’s now over, Chamberlin says: “They’re saying holy cow, I’m paying this person a lot, and they’re not worth what I paid for them.” In addition to laying off workers, she says, businesses have become cautious about what they’re willing to pay for new recruits.

Back when Jennifer O’Halloran, 40, was looking for advertising roles in late 2021, she racked up 21 interviews in a matter of weeks. She quickly secured multiple competing job offers, including one from ad agency Dentsu for a media-buying supervisor role that would have paid $95,000 with a $5,000 signing bonus.

“It was insane, everyone wanted to talk to me,” recalls O’Halloran, who’s based in San Francisco.

She ended up choosing another company that offered her more money, a role she quit last summer. Earlier this year when job-hunting again, she reached back out to Dentsu. She learned that roles comparable to the one she’d previously been offered were now paying between $85,000 and $90,000, and with no signing bonus.

Dentsu declined to comment.

Too good to last

In Tampa, Fla., Meg Reilly, president at placement firm National Mortgage Staffing, says that salaries have dropped for a range of roles as the real-estate industry has slowed. For mortgage closers and underwriters, the drop has been as much as 30%. The fall has been precipitous, though many veteran candidates were primed to expect it.

“They knew it wasn’t a forever thing,” she says, of elevated salaries.

While employers have more leverage now on pay, they should tread carefully, says Marc Goldberg, CEO of Stages Collective, which specializes in recruiting for the ad tech industry.

“I advise my clients not to go down too far, because you’ll have a temporary employee,” he says. To control costs without alienating applicants, he says, companies are doing things like increasing performance incentives while reducing base salaries for certain roles, such as sales.

In Boston, Sherri Carpineto, 46, has been job-hunting since February, when she was laid off from her director role at a medical-device startup. Companies are conducting more drawn-out vetting processes, she says, including asking applicants to complete numerous sample work projects. Sometimes, they request test assignments even before she’s made it to the interview stage.

Carpineto, who has 20 years of experience in strategy and operations and is currently doing independent consulting, says the jobs she’s interested in, which are director-level or above, are paying around 20% less than what she was making at her old position. She’s noticed prospective employers are tending to combine more responsibilities and roles under one title.

“They’re paying less and asking more,” she says.