Fewer employers plan to sweeten salaries this year, and remote work continues to face headwinds, but there’s one glimmer of light for workers and job seekers: Pay transparency laws are ramping up in more states.
A wide-ranging new study from Payscale examining compensation and employment trends across industries suggests lower expectations are in order for workers seeking raises and remote work.
The number of organizations planning to give base pay bumps this year has dipped — 6% of employers say they’re cutting pay increases entirely, roughly 2 in 10 are scaling back raises, and 14% are downsizing salary offers, according to the report.
The researchers said, “Between the precarious economy, increased employer power in the labor market, and a heated political climate, organizations have been grappling with increased tensions when it comes to compensation. There’s an expectation to reduce compensation costs while economic conditions are uncertain.”
Employers hold more cards on remote work and raises
Those companies who are doling out raises say they will hike salaries by an average of 3.5% this year, compared to 3.8% in 2024 and 4.8% in 2023 — which was the highest level in two decades.
For all of you clinging to your home office (or couch), more than 4 in 10 employers have mandated return-to-office policies this year. And 16% said they plan to enforce more in-office work. The researchers did find, however, that top performers frequently skate around those rigid rules to work remotely.
The outcome: Many workers have responded with their feet. Four in 10 employers report that some of their best workers have packed it up and quit due to the push to get back to the office.
Those employers might regret that.
“There is uncertainty around what they will be up against with inflation and tariffs,” Sandra Moran, a workforce expert at WorkForce Software, part of ADP, told Yahoo Finance. “Many industries are proactively seeking new hires right now, however, and companies that offer flexible working arrangements and opportunities for advancement — in addition to competitive compensation — will come out ahead.”
Adding to that sentiment: There are signs that the demographic reality of an aging population with fewer younger workers entering the workforce that have been lurking on the horizon for years are becoming clearer, per Cory Stahle, Indeed Hiring Lab economist, commenting on the recent Jobs report out Friday from the Bureau of Labor Statistics.
“Alongside severely restricted immigration, the prime-age labor force participation rate and employment-population ratio both appear to have reached their ceiling. As they plateau or begin to fall, labor supply issues will start to be felt.”
Of course, for those workers who have taken the exit, better pay is no guarantee. The median pay increase for workers switching jobs sank substantially to 4.8% in February from a pinnacle of 7.7% two years ago, according to the Atlanta Fed.
Five states add pay transparency laws
New laws that require employers to disclose information about employee compensation, either to existing employees or by publishing pay ranges in job ads, can come in handy in a job search.
In Illinois and Minnesota, new laws went into effect on Jan. 1. Three more states — Massachusetts, New Jersey, and Vermont — will join the movement with new legislation later this year.
To date, 14 states and the District of Columbia have enacted pay transparency laws along with a handful of cities: Jersey City, N.J.; Cincinnati and Toledo in Ohio; plus New York City and Ithaca in New York.
Payscale estimates that this year nearly 1 in 3 workers in the US will be covered by a state or local law that requires businesses to be transparent about their pay ranges.
“More than half — 56% — of companies are sharing pay ranges in their job postings regardless of whether or not it is required by law, up from 45% in 2023,” Lulu Seikaly, Payscale’s senior corporate attorney for employment, told Yahoo Finance.
What’s up with the rest? “There isn't a rush among employers to provide this information,” Julia Pollak, a chief economist at the US Department of Labor, told me.
And those that do often post gaping spreads. A recent job posting on the job board Indeed for a Research & Development Analyst at GEICO in Chevy Chase, Md. shows a salary range of $75,000 to $150,000.
“Employers still find it very tricky to guess the right number to post, balancing internal pay equity with current employees and external competitiveness,” Pollak said. “They often will post a lower number and try to get a unicorn, someone with all the skills they want prepared to work at that rate.”
Payscale estimates that this year nearly 1 in 3 workers in the US will be covered by a state or local law that requires businesses to be transparent about their pay ranges. (Getty Creative) ·AdShooter via Getty Images
Closing the gender and racial wage gap
The aim of pay transparency laws is to even out the playing field and narrow the gender and racial pay gaps.
Whether the laws are having this effect is fuzzy. One reason is that posted pay ranges can be so broad they’re meaningless.
“Whether the laws helps to close the gender and racial wage gaps depends in part on how wide a company’s posted pay ranges are,” Violet Ho, a professor of management at the University of Richmond’s Robins School of Business, told Yahoo Finance.
Pay ranges that are narrower — $50,000 to $55,000, for example — are more informative than wider ranges like $45,000 to $65,000, she said. “The former is also more helpful in bridging gender and racial wage gaps.”
As of February, 60% of US job postings on Indeed contained at least some salary information, more than triple the number five years ago.
“By including pay transparency in job postings, both men and women have access to the same data when it comes time to negotiate,” said Allison Shrivastava, an economist at the Indeed Hiring Lab. And published salaries for newly opened roles can help give existing employees a sense of the market value for their role, giving them the tools they need to advocate for equal pay, according to her research.
For those folks entering the workforce this year, having a clearer idea of what a job is likely to pay is valuable information in the job search.
“Salary transparency plays a critical role in enabling students and recent graduates to make educated decisions and effectively plan their financial futures,” Valerie Capers Workman, chief legal officer at Handshake, told Yahoo Finance.
“Knowing how much you can expect to earn in a certain role, industry, or location helps job seekers determine cost-of-living needs while balancing expenses such as student loans and saving for retirement,” she added.
