Employers are learning that good work ain’t cheap. The average American worker’s wage expectations have hit a new all-time high, almost $76,000 per year, according to new data from the New York Federal Reserve.
The data, part of the bank’s thrice-a-year Survey of Consumer Expectations, found that $75,811 is the new “reservation wage,” or the lowest pay the average U.S. worker would accept to switch jobs in their industry. That marks a $2,100 jump from $73,667, where it stood the last time this survey was conducted in November. Since then, college-degree-holding respondents have increased their wage expectations by about $5,000 to north of $97,000, almost six figures. Meanwhile, the reservation wage for people with less than a college degree has actually fallen to about $59,700, after climbing rapidly from $48,800 at the start of the pandemic to $62,100 last March.
Higher-salary expectations fit a trend of historically low U.S. unemployment. Low unemployment rates mean fewer people to fill job openings, which can be in workers’ favor. The latest U.S. Bureau of Labor Statistics figures say the rate continues to hover around 3.5%. Unemployment levels have rarely been this low since the turn of the century.
Show them the money
While the reasons why workers are suddenly raising their salary expectations are complex, among them are surely the facts that employees could be finally sensing their upper hand (hiring’s tight, and it remains a workers’ labor market); and at least 160,000 tech workers—an astounding number—have been laid off since 2023 began, many of whom were used to earning more than $76,000. All the while, America is over a year and counting into persistently high inflation, which is keeping the cost of living high and may have ground down the collective worker psyche.
A recent report by Payscale on 2023 employer compensation shows that only 56% of employers plan to give pay raises in 2023, with most of them citing bumps of between 4% and 5%. Employers, data shows, also grasp that any raise below the level of inflation is unlikely to keep the workforce content: A majority of HR professionals told SHRM Research Institute in a recent study that to retain workers, their organizations need to fork over pay raises of at least 8%.
Given these circumstances, if $76,000 sounds like a remarkably average reservation wage, that’s because it is—almost to the dollar. Census Bureau data shows that the median American household income for 2021 was $70,784, statistically unchanged from 2020. Then 2022 brought inflation of some 7%, the worst increase in four decades. Seven percent of $70,784 is $4,955, and what’s that yield as an inflation-adjusted salary if not $75,739? The current inflation level is around 5%, a still elevated number even after factoring in the drop.
As for who’s driving the higher-wage expectations, the Fed’s survey does offer one other data point worth noting. Over the past five months, male respondents increased the minimum annual salary they’d demand to switch jobs by $3,200, to $88,900. The average reservation wage for women went up by just $1,400 during the same period, to $63,100—a $25,000 differential.
It’s actually part of a depressing yearslong trend, too, amid new data that the gender pay gap isn’t narrowing fast enough: Per past data from the New York Fed, men, back in 2014, said the least they’d change jobs for was $58,800; women said $46,500. Fast-forward through a decade of hard-fought battles to equalize pay, and men’s minimum salary expectations have risen by 51%, while women’s expectations have climbed by just 36% during that time.
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