Hiring in high-wage sectors like tech, finance, engineering, and architecture has slowed significantly, a troubling indicator that pandemic business interruptions could turn into a long-term recession.
As of last Friday, job postings are 27% below last year’s trend for high-wage jobs but just 13% below trend for low-wage jobs, according to data from Indeed, a jobs website. High-wage jobs are those that offer approximately $50,000 or more annually.
“It is more expensive and often takes longer to fire and hire higher-wage workers,” said Jed Kolko, chief economist at Indeed.
“Higher-wage industries like tech and finance might plan their headcounts based on what they expect demand to look like longer-term, in future quarters or years,” Kolko said.
In contrast, lower-wage industries such as retail and food service often adjust their workforces in response to month-to-month or even week-to-week changes in demand.
Kolko said that low-wage industries like retail stores and restaurants have lost the most jobs in the past few months but can hire very quickly. On the other hand, high-wage sectors like tech and finance are slower to lay people off but also take much longer to hire, and their onboarding process is more expensive, he said.
This is why as the economy begins inching back toward its prepandemic state, lower-paying sectors are recovering at a faster rate than higher-paying ones.
This phenomenon is a “red flag” for the economy, Kolko said, because it shows that white-collar companies are increasingly hesitant to take risks and hire more high-wage employees because their forecasts for future growth and consumer spending are low. This could eventually affect low-wage jobs as well because such jobs are sustained by high-wage consumers.
Furthermore, spending by those with high-wages is down more than 8% compared to spending levels in January, which is more than any other income bracket, according to Harvard University’s Opportunity Insights tracker.
Almost 7 million employees have had their wages cut since the coronavirus pandemic started, and most of these cuts have hit higher-wage workers, according to a study analyzing data from the payroll processing company ADP.
There have also been some layoffs in certain high-wage sectors.
Tech companies, including those in Silicon Valley, have lost more than 25,500 jobs in the past few months, including layoffs at high-profile companies like Airbnb, Groupon, Uber, and WeWork, according to industry analysts.
Many tech companies that were once flying high are also finding it more difficult to find investors and liquidity, according to a report by Renaissance Capital, a financial research firm.
Multiple banks have also cut jobs in the past couple of months, and more layoffs are expected.
Another trend within high-wage industries is more competition for the jobs that are being offered.
Some sectors like the tech industry have seen a drastic decline in job postings, according to Indeed, but have also seen more competition for the same jobs, which may be due in part to the tech industry’s work-from-home options.
More educated employees have started vying for jobs below their skill level, potentially causing a domino effect by taking such jobs away from workers more suited for those roles.
Almost half of those looking for a job said they were applying for a role for which they are overqualified, according to a survey published by jobs platform ZipRecruiter in August.
