On Monday, the Federal Reserve published research suggesting that the preferred starting wage for the average American worker is at an all-time high.
According to Fox Business, the Federal Reserve Bank of New York determined that the average “reservation wage” – that is, the lowest salary at which a prospective employee will accept a job – reached $78,645 in the second quarter of 2023. This is an 8% increase from the second quarter of 2022, when the average reservation wage was approximately $72,873.
The most noticeable increase in the preferred wage was found among workers over the age of 45. Meanwhile, workers with a college education now demand an average starting salary of $98,600. Those without a college degree prefer a starting salary of around $63,300.
The tightening of the labor market has led to a flood of resignations as workers leave their jobs for positions with higher wages and better working conditions, which some economists have termed “The Great Resignation.” The latest monthly report from the Labor Department indicates at least 9.6 million job openings, which equates to roughly 1.6 jobs available for every unemployed worker.
Further studies by the Federal Reserve Bank of Atlanta show that workers who changed their jobs in the month of June received a pay raise of at least 7%. Those who stayed in the same jobs received pay raises of roughly 5.5%.
But the Federal Reserve has warned that sudden wage growth has been one of the main factors in the drastic spike in inflation over the last two years, as employers raise their prices in order to accommodate the increased wages and other work-related demands made by their employees.
“I think many, many analysts believe that it will be an important part of getting inflation down, especially in the non-housing sector, to getting wage inflation back to a level that is sustainable, that is consistent with 2% inflation,” said Fed Chair Jerome Powell in June.