The base salary level which American workers demand before accepting a new job rose to a new high this year, due to persistent inflation.
The New York Federal Reserve reported in its July employment survey on Aug. 21, that the average “reservation wage,” or the minimum acceptable wage that workers will take to switch jobs, rose to $78,645 in the second quarter of 2023.
This is a year over year increase of about 8 percent and is the largest spike on record going back to early 2014.
Since the pandemic hit in 2023, the average minimum acceptable wage level has risen more than 22 percent, which is significant since wages increasingly are a major factor in inflation.
High Prices Impacting Wage Demands
Since March 2022, the central bank has raised interest rates to between 5.25 and 5.5 percent—the highest level in more than 22 years—to curb inflation.
Despite overall inflation falling to 3.2 percent last month, from a high of 9.1 percent in June 2022, households nationwide are still struggling with high prices and rising borrowing rates.
Other factors, such as rise in the price of food, housing, and gas, continue to keep the price of goods well above the Federal Reserve’s target rate of 2 percent.
U.S. consumers are increasingly also turning to credit cards and remaining pandemic savings for basic spending, due to high prices.
Total credit card debt surpassed $1 trillion for the first time this year, according to July data from the New York Fed.
Economists are still speculating on the Fed’s next move, as signs that the labor market will remain tight for the rest of the year raises the likelihood that policymakers will keep interest rates elevated for longer.
At the last Fed policy meeting in July, officials noted that wages “were still rising at rates above levels assessed to be consistent with the sustained achievement” of its 2 percent inflation goal, according to the meeting minutes.
“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the Fed policy committee stated.
Employee Job Satisfaction Improved in July
Meanwhile, employee satisfaction with wage compensation, non-wage benefits, and promotion opportunities at current jobs, have all improved across the board, according to the report.
However, there was a gap between the wages that were demanded and what was offered.
The latest data from New York is consistent with the Atlanta Fed tracker, which saw overall wages rise at a 6 percent annual rate, with job switchers seeing a 7 percent gain.
The likelihood of switching jobs fell last month, dropping to 10.6 percent from 11 percent a year ago, while expectations of being offered a new job also declined, falling to 18.7 percent from 21.1 percent.
Employers have been attempting to keep pace with wage demands, pushing the average full-time offer amount up to $69,475, a 14 percent rise over the past year.
The actual expected annual salary also rose to $67,416, a gain of more than $7,000 from a year ago.
The New York Fed’s survey also showed some other mixed results in the U.S. labor market.
The average expected likelihood of becoming unemployed increased to 3.9 percent, the highest reading since March 2020.
Job seekers, who have been looking for work in the previous four weeks, declined to 19.4 percent from 24.7 percent in July 2022.
The numbers tumbled after job openings fell 738,000 to 9.58 million in June, according to the U.S. Bureau of Labor Statistics’ JOLTS report.
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