American Workers Want About $76,000 in Starting Wages to Take a Job Due to Inflation

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American workers are demanding at least nearly $76,000 annual wage from potential employers before taking a job due to high inflation and a tight labor market.

Employee wage expectations skyrocketed to a new high of $75,811 a year in March, according to the SCE Labor Market Survey from the Federal Reserve Bank of New York.

This is $2,100 higher than the average reservation wage of $73,667 in November 2022, when the survey was last taken and 4.7 percent higher from the same month last year.

The reservation wage is the lowest wage that job candidates will accept for a new position, as worker face financial pressure due to persistently high inflation over the past year.

While higher wages may be great for job-seekers, it has fueled inflation even further.

The Federal Reserve has been attempting to reduce inflation from its current rate of 5 percent year over year to reach its 2 percent target by aggressively raising interest rates.

The central bank has a problem, because when employers who are facing higher labor costs attempt to make up for increased wages, they boost the prices of goods and services. This, however, leads to a cyclical effect whereby employees demand higher salary expectations as their buying power decreases.

Worker Salary Expectations Still Remain High

The rise in expected salary levels comes at a time of historically low unemployment rates.

U.S. jobless rates stood at 3.5 percent in March, a bit higher than the 3.4 percent recorded in February, according to the U.S. Bureau of Labor Statistics.

Unemployment levels have only been that low a few times between 2003 and 2023, such as the period right before the pandemic in the first quarter of 2020.

With the U.S. labor market still tight and despite recent layoffs in tech, real estate, and in finance, many American workers are still quitting their jobs for better paying positions.

Meanwhile, nonfarm payrolls increased by 236,000 in March, the least gain since December 2020.

Even as the job market cools down, workers are finding that their expectations for higher wages are still tipped in their favor, as demand to fill positions remains strong.

The Fed survey asked respondents on the lowest wage or salary they would accept (before taxes and other deductions) before considering whether to take a particular job in their line of work.

It was found that men particularly raised their wage expectations by about 4 percent, to $88,883, while women only increased their minimum requirements by just over 2 percent, to $63,069.

Since November 2022, workers with a college degree have raised their reservation wage expectations by about $5,000, to over $97,000, while those with less than a college degree have reduced their expectations by about $160, to about $59,700.

Growing Inflation Outpaces Average Wage Gains

Most Americans have not seen their wages keep up with the current costs of inflation, with the average American household (of 3.1 people) still earning a median income little different from before the pandemic, according to a March 8 report by SmartAsset.

The median household income was about $71,000 in 2021, according to the United States Census Bureau, which had not changed much from 2020.

Average hourly earnings rose at a 4.2 percent annual pace in March, the lowest level since June 2021, according to the Department of Labor.

The Fed is hoping to steer its interest-rate policy in a way to slow down the U.S. labor market without tipping the economy into a serious recession.

U.S. GDP growth is tracking at a 2.2 percent at an annualized pace for the first quarter, according to the Federal Reserve Bank of Atlanta, while many economists expect an economic contraction towards the end of the year.