Many of the millions of people who switched jobs during the pandemic are feeling the bite of inflation especially hard, and for an often overlooked reason—they opted for pay cuts.
All around, it has been a good time for American workers and their earning power—if not their spending power. Labour shortages have driven up wages, and many in-demand employees have quit jobs for better-paying ones.
Yet a sizeable share of job switchers took pay cuts in the Covid-19 era, according to new research. In a survey of more than 2,300 workers, 32% of those who changed jobs since early 2020 said they made less money as a result.
Many have traded in a higher pay check by choice. While nearly a third of job switchers who now make less money said they had been laid off from their previous jobs, about 25% took a pay cut for better work-life balance, according to Prudential Financial, which commissioned the study. Others said they took a lower-paying job because they wanted to pursue a passion, work remotely or in a new location, or find an employer more aligned with their values.
Rising prices for everything from food and housing to vacations are now testing those decisions, pushing many to tighten budgets already trimmed when they opted for lower-paying jobs. Some job switchers say they are pursuing extra work—even if their original goal was to work less.
Many, including 38-year-old Mae Singerman, say they still have no regrets.
“I sacrificed savings for now to live a more balanced life,” says Ms. Singerman, who left her job as director of operations at a nonprofit last fall for a lower-paying administrator role at another organisation.
She made the decision to find a new job after her appendix burst late one night and she pinged her co-workers from the emergency room to say she was in the hospital but acted as if it were no big deal. “I was obsessed with the job,” she says she realised. “In retrospect, why was I emailing my co-workers at 3 a.m.?”
After her recovery, she took a new job that would let her spend more time with her two young children and help take care of her mother, who has dementia. The catch was it came with a 35% pay cut. Because her husband has a union job with predictable annual raises, Ms. Singerman says the couple didn’t have to make major changes to their lifestyle: She lives in a rent-stabilised apartment, and her youngest is no longer in daycare. But as other expenses have climbed, there have been adjustments, such as no longer contributing to her 401(k). The trade-off has been worth it, she says.
“It’s hard for me to imagine going back to what I had at this point in my life,” she says.
Some who quit jobs for lower-paying positions are now seeking extra work, as are many U.S. workers. In a recent survey of more than 1,000 working adults, 38% said they had looked for a second job and 14% said they planned to.
Nearly two-thirds of respondents said it was harder to pay for living expenses than a year earlier, according to the business-software maker Qualtrics, which conducted the study. Inflation is running near a 40-year high, raising the cost of everyday needs such as car repairs and hair cuts.
Christopher Doran, a 32-year-old in northern New Jersey, makes 20% less than he did as a director of nursing at an assisted-living facility until about a year ago.He says he made the switch to nursing at a hospital after realising that his work affected his relationships with friends and family, and his mental health.
“I was missing events with church, or dinners with friends or family. I had to work holidays, so really, I didn’t have any opportunity to enjoy my life,” he says. “I was burned out.”
Mr. Doran says he is happy with his choice, but he feels the effect on his finances daily. He doesn’t go out as much because of gas prices. “I used to shop healthier,” he adds. “I can’t because it’s so expensive.”
To offset the salary difference and pay off his credit-card debt, Mr. Doran picks up extra shifts at the hospital, which gets him overtime pay. It’s fewer hours and less stress than his old job but still a lot of work, he says.
“I’ve been sacrificing my leisure time to pay the credit cards,” he says. “It’s still kind of taking time I wish I had away.”
For many who have lost jobs, a pay cut was the only option. Kimberly Allen, 38, has changed jobs several times during the pandemic, and her pay has fluctuated with each change. In 2020, she left a nonprofit and took a pay cut for a role in recruiting. A little over a year later, she left that job and almost doubled her salary by taking a contract role with a tech company as a talent sourcer. She was suddenly unemployed when the role ended a few months later.
“I took a leap of faith,” says Ms. Allen, who lives in Schererville, Ind.
Ms. Allen has since found another recruiting job on contract, but it pays 10% less than her last job. Meanwhile, everything from school supplies to sports-team fees and gas spent shuttling everyone back and forth is more expensive than it used to be. Ms. Allen says she and her husband have put a cap on the number of activities their kids can participate in and cut back on entertainment spending.
“We’re working on creative low-budget ways to have fun at home for the entire year and probably next year,” she says.