WSJ Your Money Briefing - How Companies Are Quietly Lowering Salaries

Episode Date: September 11, 2024

As the labor market cools, many hiring managers are resetting pay levels for new hires. Wall Street Journal reporter Ray A. Smith joins host J.R. Whalen to discuss how companies are able to reduce salaries and still attract desirable talent. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Ecolab Water for Climate. Less water, more growth. Results will vary. Learn more at Ecolab.com slash EWC. Ecolab Water for Climate. Transforming the way the world thinks about water. Here's your money briefing for Wednesday, September 11th. I'm JR Whalen for The Wall Street Journal. November 11th, I'm JR Whalen for the Wall Street Journal. Over the past several years, the red hot labor market forced managers to raise salaries to recruit and retain employees. But now the labor market has cooled and companies are quietly reducing salaries. This shows that the balance of power has shifted back to employers and companies after a couple of years where

the balance of power was more on the job seeker side where they could command a lot more and get a lot more. We'll talk to Wall Street Journal reporter Ray Smith after the break. Cyber attackers are using AI and creative ways to compromise users and breach organizations. In a security landscape where you must fight AI with AI, the best AI protection comes from having the best data. Zscaler has extended its Zero Trust architecture with powerful AI engines that are trained and tuned by 500 trillion daily signals. Learn more about Zscaler Zero Trust plus AI to prevent ransomware and AI attacks.

Experience your world secured. Visit zscaler.com slash Zero Trust AI. After pay for many white collar positions fell over the last year, now salaries for new hires in blue collar positions are also coming down. Wall Street Journal reporter Ray Smith joins me. Ray, bring us up to date. Why was pay for many white collar salaries reduced? It was reduced primarily because they had gotten out of control, some would say, post-pandemic

when there was over-hiring. So this is almost like a pay reset, some would say a return to normal for pay which had gotten overheated when the job market was tighter and hotter. In what fields are we seeing this pay reset for blue collar workers? We're seeing it in industries such as food and manufacturing and that's according to ZipRecruiter who did an analysis of many of their job postings where they found blue collar sectors like food, manufacturing, even transportation, those all registered drops in average posted pay. Why those fields?

Mostly because they had seen declines in hiring after they had gone through a period of over hiring and strong demand for those kinds of workers. That demand has now been satisfied, and so there's less opportunity to hire and also to pay these new hires as much money. By how much are these starting salaries coming down? It depends on what sector you're looking at.

People told us they've seen job postings where the salary might have been between $175,000 and $200,000 a year ago, now being advertised for tens of thousands of dollars less. According to ZipRecruiter, we saw the biggest decline in retail where average wages advertised for new hires is down 55.9%. We also saw drops in pay of as much as 24% for agriculture and 17% for manufacturing. We spoke to a McDonald's franchisee who has restaurants in Ohio, Pennsylvania and West Virginia, he starts his hourly workers at $13 an hour, and now he's pressuring his managers to see if they can reduce that to $12 an hour. His rationale is labor expenses at the locations there have exceeded his food costs, and that's

something he hadn't seen in his 24 years with the company. How are employers finding a balance between offering job candidates a lower salary, but still attracting people with the experience that they're looking for? Companies are looking to attract people they think are coachable, people who can be paid less than industry veterans, but they can learn quickly and they can be coached on how to do those roles. So they're okay bringing in people with a lower amount of experience. Exactly.

And how are companies dealing with finding workers who might be concerned about the cost of living? In some cases, companies are moving enterprise software jobs, for instance, or other kinds of jobs to less expensive cities. In the past, they would have been in Chicago and San Francisco, and now they are in places like Cincinnati or St. Louis, Missouri. And that's just an indication that one way of resetting pay without actually lowering

the salary specifically, but just more the cost of living affects how much you're going to pay people in those cities. More broadly, what does this say about the balance of power between workers and hiring managers? Yeah, this shows that the balance of power has shifted back to employers and companies after a couple of years where the balance of power was more on the job seeker side, where they could command a lot more and get a lot more, including signing bonuses for roles. And that was a changeover because of the pandemic

and the need for workers and the over hiring that took place as well. Now we're seeing that balance of power shift back to the employer and companies and it remains to be seen how long that will last. What kind of responsibility is there on the part of the job seeker who might be used to seeing higher salaries,

but now the trend is salaries coming back to the reality of what they were in 2019. In some cases job seekers are going to have to reset their pay expectations. I talked with one job seeker who talked about having to lower what he hoped to get by $20,000 just because the job postings he was seeing had lowered their salary ranges. So some job seekers may have to wake up to the fact that they have to reset what they're looking for in pay. That's WSJ reporter Ray Smith. And that's it for your Money Briefing. This episode was produced by Zoe Kolkin with supervising producer Melanie Roy. I'm JR Whelan for The Wall Street Journal. Thanks for listening.