Want higher pay? Your chances may be better now than in six months

Recent government job data shows the US labor market is still strong, with the unemployment rate at a low 3.5%.

“The unemployment rate is the lowest it has been in 50 years,” President Joe Biden said on Friday. “We have completed two of the strongest years of job growth in history.”

But while the Federal Reserve looks to rein in inflation, there is a risk that the labor market could decline in 2023. The question is whether it will lead to a “soft landing” or a full recession.

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“A smooth, perfect landing will still mean more layoffs and a softer labor market,” said Andy Challenger, senior vice president at outplacement firm Challenger, Gray & Christmas.

For workers looking for work today, many things matter, he said.

“Today is better than six months from now,” Challenger said. “So I’ll try to make your move as soon as possible.”

The latest data showed job switchers had seen wage growth of 7.7% in November, while workers who remained employed had seen 5.5%, said Daniel Zhao, chief economist at Glassdoor, citing figures from the Atlanta Federal Reserve.

However, workers are unlikely to see a sizable pay increase now, as the data shows last year, he said.

Higher wages are needed to keep inflation at bay. The consumer price index, a measure of broad goods and services, rose 7.1% in November compared to a year earlier.

Wage growth, based on average hourly earnings, rose 4.6% from a year ago.

“People who switch jobs have more inflation than people who keep working,” Zhao said.

One caveat is that real wage growth could exceed inflation in 2023, if current trends continue, according to Curt Long, chief economist and vice president of research at the National Association of Federally-Insured Credit Unions.

But with the prospect of an economic downturn, workers seeking higher pay face a more complicated decision about whether to stay or leave.

The gap between wage growth for job switchers and job keepers is the highest on record, at 2.2 percentage points versus 0.7 percentage points historically, noted Julia Pollak, chief economist at ZipRecruiter.

“There’s a huge incentive for workers to work,” Pollak said.

New salary transparency laws, under which employers disclose the salary range they want to offer new hires for advertised positions, could also help, he said.

The law is currently in effect in Colorado, California, Washington and New York City. In September, New York state will follow suit.

People who don’t live in the area can still find pay information on websites like ZipRecruiter, Glassdoor and others, he noted.

With today’s competitive salary levels, even some laid-off workers can find higher offers than they received before, according to Pollak.

“The best way to know your worth is to get an outside quote, which makes it all real,” Pollak says.

Workers who see new hires getting paid more may want to reach out to their current employers, Pollak said.

Tell them that you like your job, have learned a lot and are committed to the company, but you know that your income will be higher elsewhere. “If you can fit in, I’d love to stay,” Pollak said.

Employers may have even more reason now to pay to retain talent. A record 4.5 million workers quit their jobs in November, up 8.9% from the previous month.

“We’re still seeing a lot of projects that we can’t do,” Long said. “People are leaving their jobs now, looking for new jobs, at a higher rate than before the pandemic, but lower than at the beginning of 2022.”

Often have a valid request to pay more, you have to work and win a job interview and get a job offer, according to Challenger.

“This is how you go out and verify your value in the market,” Challenger said.

If you go that route, be prepared for your current employer not to match the offer.

“You have to be willing to move,” Challenger said.

Admittedly, the decision of whether to make a big career move before an economic downturn is “always a balance of risks,” Challenger said.

If a company decides to pursue layoffs, it may follow a “last in, first out” policy that leaves the newest employee with a pink slip. “It is not risk-free to move the project in the middle of the falling market,” Challenger said.

“But you have more influence now than you did six months from now,” he said.

While the job market is still healthy, it’s not as hot as it was six or 12 months ago, Zhao noted. By 2023, that may translate into slower hiring plans and salary increases, he said.

Before making the move, it is worth considering whether there are aspects of the job that can make up for not taking up when you want. For example, if you can negotiate working from home one more day each week, it can help you save money on gas or other transportation costs, Zhao said.

Also, consider other compensation in the form of benefits and the value of happiness in the current position. “The base salary is not everything,” Zhao said.

After evaluating your options, the best approach is to take “educated risks,” he says.

“If you never take risks, it will be difficult to get a raise or a job you want that suits you,” Zhao said.