American workers are demanding almost $80,000 a year to take a new job

The “reservation wage,” which represents the minimum acceptable salary for workers to accept a new job, has reached a record high this year, indicating the impact of inflation on the labor market. The New York Federal Reserve’s latest employment survey revealed that the average reservation wage increased to $78,645 in the second quarter of 2023, marking an 8% rise from the previous year. This level represents the highest ever recorded since the data series began in 2014, and over the past three years, it has surged by more than 22%.

The rising reservation wage is significant as wages are a key driver of inflation. While prices of goods have moderated from their peak in mid-2022, contributing to a decrease in overall inflation, other factors are still keeping inflation above the Federal Reserve’s targeted rate of 2%.

This data aligns with the findings of an Atlanta Fed tracker, which indicates a 6% annual increase in wages overall and a 7% gain for those switching jobs.

To match wage demands, employers have pushed up the average full-time job offer to $69,475, reflecting a 14% surge over the past year. Expected annual salaries have also risen, reaching a new high of $67,416, marking an increase of more than $7,000 from the previous year.

Although a gap remains between the wages workers desire and the offers they receive, workers’ satisfaction with compensation and their prospects for advancement have shown improvements across the board.

These signs of a tight labor market could lead policymakers to maintain higher interest rates for a longer period, considering that the Federal Reserve has observed wages rising above levels consistent with its 2% inflation target. This could impact the central bank’s policy decisions in the face of ongoing economic uncertainty.

The survey also highlighted other mixed patterns in the labor market. The percentage of job seekers has decreased, likely due to a decline in job openings, while the likelihood of changing jobs and expectations of being offered a new job have both declined as well.