Employers are courting less-educated workers
Federal Reserve Bank of New York economist Gizem Kosar may not have cracked the Case of the Missing Wage Growth yet, but she has found a promising lead.
In the July release of labor-market data from the bank’s Survey of Consumer Expectations, Kosar and analyst Kyle Smith noticed something surprising: workers without a bachelor’s degree are switching jobs at the highest rate since the thrice-yearly survey began in 2014, but their salaries have fallen slightly in the past year.
Their earnings should be rising. If less-educated workers are in demand, employers should be forced to lift wages to poach outsiders and retain their employees in the face of rival offers. That’s started to happen to workers with bachelor’s or advanced degrees.
During the labor market’s slow, nine-year crawl back from the Great Recession, employers grew accustomed to a seemingly endless supply of experienced, educated Americans who were desperate for work.
Now, the market’s heating up. The unemployment rate for workers age 25 and older with at least a bachelor’s degree sat at 2.1 percent in August. It’s hovered around that number for a year, and doesn’t have much more room to fall.
As competition for their services intensifies, the average fulltime salary for college-educated workers in the survey rose about $5,800 over the past year. Over the same time, the comparable salary for less-educated workers in the survey has declined by about $4,700.
Those trends raise another question: why are less-educated workers switching jobs? It’s apparently not because they’re chasing the money.
Here, the New York Fed survey’s utility becomes clear. It follows a rotating, representative panel of around 1,000 U.S. households and asks questions about worker motivations and job satisfaction that we can’t get from our usual sources. Because it follows workers for a year, the survey can provide additional insight into things like job-switching and earnings growth.
Supplemental surveys like this one won’t beat the Labor Department at its own game. They won’t produce Unemployment Rate 2.0. But when done right, they fill in gaps and suggest answers to some of the job market’s more bewildering mysteries.
The first clue is that employers are being forced to cast a wider net. Poaching a college-educated worker is costly and, thanks to that salary surge, getting more so. On average, respondents with a bachelor’s degree or higher said it would take an annual salary of around $81,900 to pry them from their current job, up from about $76,600 a year earlier.
In that context, experienced workers with less than a bachelor’s degree seem like a bargain. On average, they said they’d leave their job for around $47,300, virtually unchanged from a year earlier.
But how are employers luring these workers, if not with cash?
It’s not benefits. The share of less-educated workers who say they’re satisfied with their benefits has remained essentially unchanged over the past year at about 63 percent, compared to a record high of 74 percent for their educated peers.
So what’s the culprit? “There is a significant rise in the proportion of respondents without a college degree who are satisfied with the career progression opportunities at their current jobs,” Kozar told us.
The share of less-educated workers who are satisfied with their opportunities for promotion has soared more than 10 percentage points in the past year. At 51 percent, it’s now five percentage points higher than that of college-educated workers.
It’s likely that workers are moving to jobs which they think will lead to raises, or more lucrative offers in the future, Kozar said.
The underemployment and skills mismatches that defined the recovery may be sorting themselves out. Workers may finally be finding jobs that match their talent and ambition, if not their salary requirements.