WSJ Your Money Briefing - Why It’s Getting Harder to Negotiate Your Salary

Episode Date: August 9, 2024

As the labor market cools, workers have lost the leverage that won them substantial pay raises over the past several years. The Wall Street Journal’s careers and workplace deputy bureau chief Vanessa Fuhrmans joins host J.R. Whalen to discuss what it means for new hires who are switching jobs and for any worker who wants to negotiate a higher salary. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Go back to school with Rogers and get Canada's fastest and most reliable internet. Perfect for streaming lectures all day or binging TV shows all night. Save up to $20 per month on Rogers Internet. Visit rogers.com for details. We got you, Rogers. Here's your money briefing for Friday, August 9th. I'm J.R. Whelan for The Wall Street Journal. 9th. I'm J.R. Whelan for The Wall Street Journal.

Remember the great resignation when lots of people up and quit and switched jobs? It was pretty easy to land a pay increase, and a pretty big one at that. But now that the labor market is cooling, so are the prospects for a sizable raise. Where the market is really shifting a lot in terms of money is with new hires. For instance, from a survey that ZipRecruiter did, not even 60% of people who switched to a new job recently were getting more money for that job. We'll talk to WSJ Careers and Workplace Deputy Bureau Chief Vanessa Furmans about what that means if you want to negotiate your salary after the break. Moving us to branch out to new experiences full of seasonal flavors and coastal views. Because out on the trails, our connections strengthen with every step. So take root and find that fresh fall perspective in Pure Michigan.

Keep it fresh at Michigan.org. Your next pay raise is likely to be smaller than you expected. Wall Street Journal editor Vanessa Furman joins me. Vanessa, just a couple of years ago, many companies said they were boosting their budgets to be able to pay out higher salaries and bonuses. How have things changed? Well, the whole job market has just really settled down quite a bit. Two years ago, companies were scrambling to find workers. They thought they were going to have this ongoing digital boom from the pandemic. And so they were overhiring, actually, and estimating that this growth would continue. And they were also scrambling for

workers. It was a shortage of workers. And that has all really settled down. So people now are no longer leaving their jobs like they used to for presumably better jobs. And companies have really slowed down the hiring. And that means that they don't have to offer the same incentives and more money to lure workers. And they also don't have to pay bigger raises to keep workers to stay. You track the numbers behind this trend. What'd you find out? Where the market is really shifting a lot in terms of money is with new hires. Because as we know, once you are in a job, you earn a salary,

those salaries don't tend to go back down. It's a question of managing the raises. And that's one percentage point here, two percentage points there, or working with freezing or holding bonuses steady or even cutting the bonus. But when someone is coming into a job for the first time, for instance, from a survey that ZipRecruiter did, not even 60% of people who switched to a new job recently were getting more money for that job. And back at the end of 2023, at least 70% of people were

getting a better salary. We've seen indications in the past few jobs reports that the labor market is cooling. How is that affecting how managers are setting pay and raises? They're being more judicious with those bonuses and those merit raises, and they may be just simply offering less money than they were offering when they were advertising for the same job two years ago. And we're seeing that in those fields that were really in high demand, like technology, finance. That's all kind of slowed down.

What other steps are some companies taking to reset pay rates. Some companies that have multiple offices in different cities and even countries might be looking to place people who were previously in a high-cost city or high-cost country. They might be trying to fill that position as it opens up in a lower-cost city. We spoke with one CEO who referred to it pretty bluntly as geographic arbitrage. Overseas where it might be a cheaper place to live or lower taxes for the company? Right. And even here in the U.S., you can see there are huge cost-of-living differentials between cities. San Francisco or New York versus, say, a Dallas or even a Florida.

In what fields have we seen the steepest pay drops? For new hires, you're seeing it in some professional services jobs, such as finance. We have some data from the payroll and benefits company Gusto, and they showed finance in particular, the pay advertised for new hires across the finance sector is down 9% since last year. And how about where raises aren't dropping as much? Where we still see shortages of workers. We're undergoing, as an economy, quite a shortage of accountants still. Those pay rates continue to climb.

How is this trend affecting workers who might feel they could negotiate their salary if they're coming into a company as a new hire? Well, they're having a lot less luck in negotiating those salaries. First of all, we're seeing fewer people even trying to negotiate their salaries. They're well aware that they're not as in demand. They weren't as hard to get from the company's perspective, and they may not want to push it. And the people who are actually trying to negotiate salaries, fewer of them are having successful outcomes and getting a better offer. You mentioned a moment ago that some companies are still struggling to fill open slots.

If this trend continues, could stagnant raises potentially spark a new round of competition for workers? Stagnant is usually what keeps people staying put. If there's not an incentive to leave to go to a better job that's paying better, that's why we're seeing a lot of people staying now in the jobs that they are. They know that the job market just isn't as hot as it used to be, and they know that the premium for switching a job is just not what it was two years ago, even one year ago. That's WSJ's Vanessa Furman's. And that's it for your Money Briefing. Join us Saturday for What's News in Markets. And then on Sunday, we'll have a special bonus episode where we talk to Olympic athletes about the financial challenges they face when going for the gold. Today's show was produced by Ariana Osborough.

I'm your host, J.R. Whalen. Additional support this week from Zoe Culkin. Jessica Fenton and Michael LaValle wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim was our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is The Wall Street Journal's head of news audio. Thanks for listening.