Job Market Trends Show Laid-Off Workers Often Take Pay Cuts In Their Next Roles

Amid a grim job market, new data shows laid-off workers are often accepting lower-paying roles.

New research shows that a growing number of laid-off workers go on to accept jobs that pay less than their previous roles.

Revelio Labs, an analytics firm, recently reported that a growing share of workers are taking lower-paying jobs, Business Insider reports. Among white-collar employees who switched roles at the end of last year, 40% accepted pay cuts of more than 10%, the highest rate in at least a decade.

“Accepting this is going to set my career back five years,” said Scott, a tech worker who took a six-month contract technician role after losing his senior manager position in 2023 and spending two years trying to find a similar job. “I know I’m really good. I want a chance to prove myself.”

Among Revelio Labs’ findings, the share of professionals receiving comparable raises has also fallen to its lowest level, suggesting the labor market may be weaker than it appears. While just 4.4% of the U.S. workforce is unemployed, low by historical standards, that figure may mask how difficult it’s been for displaced workers to find new roles.

Long-term unemployment has nearly doubled over the past three years, and after extended job searches, many people, like Scott, are accepting positions they wouldn’t have previously considered. In December, when Scott took the job, he was among 7.5 million unemployed Americans competing for just 6.6 million available positions.

His situation underscores why many workers are accepting pay cuts: hiring has slowed, giving employers more leverage and making them more selective. One clear sign appears in job postings, where companies demand more experience. Mid-career roles now require about 10% more experience than three years ago, and senior roles about 11% more, according to the findings.

The situation could have lasting effects for workers like Scott. Taking a lower-paying job can lead to “wage scarring,” in which future earnings are anchored to a reduced salary. But with a weak job market, staying unemployed posed an even greater risk.

Hopes of a white-collar rebound have yet to materialize, as layoffs tied to AI and broader cuts continue across major companies, adding more workers to an already competitive job market. A working paper from the National Bureau of Economic Research found that fewer than half of surveyed CFOs (44%) expect AI-related job cuts.

Across the broader economy, that translates to about 0.4% of jobs, roughly 502,000 out of 125 million, with about half impacting white-collar roles. While that’s a sharp jump from last year’s 55,000 AI-related layoffs, it still represents a small share of the overall workforce.

“It’s not the doomsday job scenario that you might sometimes see in the headlines,” said John Graham, co-author of the study and the director of the Duke CFO survey.

For now, Scott is focused on proving himself in his new role and is already being considered for a promotion with a modest raise. He’s also interviewing for other positions that could offer better pay. Though none would match his pre-layoff salary, each could move him closer to his former career path.

“I know I can impress people if they give me a chance,” he said.

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