White-collar workers now facing wage cuts as employers begin to pick up – why the US job market may not be good

On the surface, the US job market looks healthy. According to the Bureau of Labor Statistics (BLS) the unemployment rate remains at 4.4%, a historic low (1,2).

But under this heading, a very worrying picture is created for the hardworking workers. And if you’re currently employed, it’s worth paying attention to.

Business Insider recently profiled Scott, a man who spent more than two years applying for more than 1,600 jobs, taking 78 interviews and using his savings before landing the position — a six-month contract two levels below his former senior manager role, at half his previous salary. “Accepting this will restore my work in five years,” he said (3).

And his story is no different.

Data from labor analytics firm Revelio Labs shows that 40% of white-collar workers who changed jobs by the end of 2025 saw their wages cut by more than 10% — the highest figure in at least 10 years. The share receiving the same large increase is the lowest in the same period (3).

The white-collar job market is facing the harsh reality that the low unemployment rate is not reaching it.

In February, the US economy shed 92,000 jobs (1). Companies like Atlassian and Block have announced recent layoffs, and Meta plans to lay off 20% of its workforce, Business Insider reports (3,4).

The number of long-term unemployed (those unemployed for at least 27 weeks) reached 1.9 million in August 2025, an increase of 385,000 annually, according to BLS data (5). Long-term unemployment now accounts for nearly a quarter of all unemployment, the largest share since February 2022.

A supply-demand imbalance explains much of it. In December, when Scott took office, there were 7.5 million unemployed Americans and only 6.6 million jobs. With that kind of competition, employers have gained choice – requiring more years of experience in open roles, especially at mid-career levels, Revelio Labs found (3).

Read More: 5 important steps you can take once you’ve saved $50,000

Here’s a personal financial reality that makes this more than just a labor market issue: taking a pay cut isn’t just hurting you now, it can hurt you for years.

Economists call these wage scars. A study from the IZA Institute found that returning workers earn about 6% less than similar workers who move from one job to another, and that gap widens to about 14% in the fourth year (6).

The machine works in two ways. First, future raises build on your current salary – a lower position means less compounding over time. Second, when interviewing for your next role, employers often base offers on your current earnings. Therefore, a cut in income today can set back your income trajectory for years.

If you are currently employed, the time to defend your position is before you are laid off, not after. The job market that existed in 2021 and 2022 – where energy remains strong and workers – has changed. Planning your finances as if a period of reduced income is a real possibility, rather than a distant one, is wise (3).

Only 41% of US workers feel their current pay is sufficient to support their lifestyle, and 59% report being uncomfortable with their level of emergency savings, according to BambooHR’s 2025 compensation trends study (7). That gap widens when income stagnates.

Building an emergency fund strong enough to cover three to six months of expenses is a clear deterrent against being forced into desperate employment.

If you’re already in the workforce, choice is a luxury few people can afford right now. But there are strategic ways to reduce salary scars:

• The topic of negotiation and promotion timelines, even if it accepts a lower base, keeps track.

• Contract and consulting roles, like the one Scott accepted, can keep revenue flowing while growing a better opportunity.

• Moving with time in growing sectors, such as health care and technology infrastructure, often provides faster recovery options than waiting in a weak industry.

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Bureau of Labor Statistics (1), (5); The Federal Reserve Bank of St. Louis (2); Business Insider (3), (4); IZA Institute (6); Bamboo HR (7)

This article provides information only and should not be construed as advice. Offered without warranty of any kind.