Why it pays a lot less to switch jobs right now: ‘That new-hire glow is fading'

At the height of the "great resignation," many new hires could expect to double their salaries or receive generous sign-on bonuses. 

But landing a new job today doesn't pay off like it did only a year ago. 

In 2022, new hires could expect to see a 10% jump in pay — but in recent months, year-over-year pay growth for those workers has fallen dramatically, reaching just 2.9% in September, according to new data from payroll processing firm ADP. 

Lower quit rates, increasing labor supply and falling worker demand could all be to blame for slowing wage growth this year, says Nela Richardson, chief economist at ADP. 

Some industries have been hit harder than others: For new hires in finance, pay growth has been at a "literal standstill" since July, says Richardson. Jobseekers in the technology sector "have it even worse," she adds. Their pay began falling in January and has continued to decrease for most of 2023.

As Richardson cautions: "That new-hire glow — contentment fueled largely by big pay increases — is fading fast."

'The golden age for jobseekers' is over

Chris Cicconi, 37, has been looking for remote sales jobs, mostly at tech companies based in the U.S., since late October, after losing his job at an AI software firm. 

He's done dozens of interviews and even received a couple of job offers at this point, all of which came with "significantly lower" salaries — and in some cases, less than half — than what he was earning in his previous role, for the same title and experience level.

The experience has been "very different" from the last time Cicconi looked for a new job in 2021, when recruiters flooded his inbox and were more willing to negotiate salaries.

According to the Indeed Wage Tracker, which measures changes in wages advertised in job postings, October wages were up 4.2% year-over-year but well below the 9.3% year-over-year wage spike in January 2022. 

"2021 and early 2022 really were the golden age for jobseekers," says Cicconi, who lives in Montreal. "Now, the power's swung back toward bosses and a lot of the benefits we came to expect during the 'great resignation' are gone now."

Aerin Paulo has felt similar frustrations during her job search. Paulo, who lives in Connecticut, has been on the lookout for new marketing positions since the accounting startup she worked for suddenly closed down in September.

"I've noticed a lot more employers are being vague in when and how they discuss pay," the 39-year-old says. "They'll just say the salary is competitive or provide a comically large range, like $80,000-$250,000." 

Why companies are tightening the purse strings

Organizations are walking a "delicate tightrope" right now, says Tom McMullen, a senior client partner at global consulting firm Korn Ferry. "Organizations don't want to spend too much, but they know they can't spend too little if they want to remain competitive, so they're trying — and struggling — to find that sweet spot."

Bosses are less likely now to give new hires pay raises because turnover has stabilized in most industries, and they're concerned that paying them more than existing employees could drive existing employees to quit. 

"People that have continued to work for the same organizations through the 'great resignation' feel that they've been taking a loyalty discount because they didn't switch jobs and, in many cases, are watching new hires at their organizations get generous offers," McMullen, who leads Korn Ferry's U.S. pay equity practice, explains. "No one wants to exacerbate pay equity issues when the hiring market has finally calmed down."

Some employers are turning to low-cost benefits including fitness stipends, mental health resources and commuter benefits to lure talent in lieu of higher pay, McMullen points out.

"Three years ago, a lot of bosses' hair was on fire, they couldn't fill open roles fast enough," he says. "Now, that the job market is cooling, there's less reason to panic and more leverage with hiring."

Richardson says that as the pay premium for new hires shrinks, the decision to stay is "more likely to be the one that sticks."

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