When employers deliver a job offer, it had better come with some teeth: Americans’ wage expectations have hit record highs, according to a Federal Reserve Bank of New York survey released Monday.
Job seekers’ average reservation wage — the lowest pay they’d be willing to take for a new job — climbed to $78,645 in July 2023, up nearly 8% from July of last year, according to the New York Fed’s latest survey on consumers’ labor market experiences and expectations.
The higher wage expectations are a reflection of this current moment in the economy and the labor market, said Julia Pollak, chief economist for online job marketplace ZipRecruiter.
“It largely explains what we’ve been seeing during this summer of strikes and unions pushing for higher wages; and, of course, wages follow inflation, and part of the reason that workers are expecting higher wages is because prices have risen 17.5% since the pandemic,” she said.
Were it not for the post-pandemic inflation surge, prices would have increased only 7% she said.
Wages have grown in that time, but not to pre-pandemic levels — and certainly not to counteract inflation. May was the first month in more than two years when US workers’ real hourly earnings (those adjusted for inflation) grew on an annual basis, and June marked the first month in 26 that real weekly earnings grew year over year.
“Many workers feel that even though they’ve received these big nominal wage increases since the pandemic, they’ve become no better off because their wages have just tracked inflation and not risen for productivity at all, and they’re expecting wages to catch up to inflation and productivity and to be made whole,” Pollak said.
Men and college grads demand more
While reservation wages rose for workers across the board, some groups’ demands are significantly higher than others: For college graduates and men, the wage floors were $98,644 and $91,048, respectively.
Women’s reservation wages set a record as well, but at $66,068 — $12,500 below the average and nearly $25,000 below men’s expectations.
“The fact that women are earning 84% of what men earn but expect only 73% suggests that perhaps the media narrative [of the gender pay gap] makes women expect even less and that perhaps we are not preparing young women for the workforce adequately,” Pollak said. “Perhaps we’re sort of worrying women into thinking they’ll automatically make less, when that’s just not true anymore.”
Pollak noted recent research on the role of the “ask gap” in gender pay inequality. Economist Nina Roussille, who’s an assistant professor in economics at the Massachusetts Institute of Technology, used data from Hired.com to determine that women on average asked for 3.3% less than men for a full-time engineering job, with that gap growing to 6% for women with more experience. However, when salary transparency was employed on the site and a median wage was given, the gap closed.
“Especially in male-dominated industries, women may just not know what the going rate is and underestimate,” Pollak said.