Many employers aren’t offering the high salaries employees had grown accustomed to in recent years, leaving workers to decide whether they should accept a pay cut.
Pictured: Scientist counting money/Yuliia/Adobe Stock
As the labor market continues to tighten and the pace of layoffs remains steady, workers across industries are seeing slower wage growth compared to previous years, causing many to wonder if they should lower their salary expectations or hold off for an employer who can meet their demands.
This is partly because many companies can’t afford to pay workers as much as they have in recent years. According to a 2023 Payscale report, 80% of companies surveyed said they plan to give base pay increases this year, compared to 92% in 2022. Additionally, 15% are not sure whether they will offer raises at all.
For many in the biopharma industry, this may seem like a non-issue, as job-hopping, or frequently changing jobs for better pay or benefits, became one of the more popular methods to score a large increase in pay during the Great Resignation. However, this may not be a viable option for long.
According to the Federal Reserve Bank of Atlanta, as of March, while those who switched jobs did secure larger raises than their job-staying counterparts, the average wage increase was much lower than job-hoppers got in 2022.
Additionally, with inflation still going strong, more workers are hanging onto their jobs than in prior years. The Federal Reserve Bank of Atlanta reported that quit rates fell from 3% in 2021 to 2.6% in February.
It stands to reason, then, that because employers have been able to hang onto more talent, they are less desperate for new hires and are not willing to pay as much as they once were.
The State of the Biotech Job Market
While the life science industry does not always mirror the trends of the overall job market, it is still largely affected by changes in the economic landscape. Joe Mullings, founder and CEO of The Mullings Group, told BioSpace this is due, in part, to the industry’s reliance on investors.
During the rise and peak of the COVID-19 pandemic, biotech saw a boom in investment like it has never seen before. But as the pandemic waned, so did the interest of investors. As infection numbers dropped, many decided to pull out their lump sums and move on.
“If you’re in the investment community and you invest in biotech or med tech, and the news that you’re seeing every day is about inflation, rising housing costs, socio-economic issues, geopolitical strife in the world . . . all of those entertain an unpredictable environment,” Mullings said. “Markets don’t like unpredictability.”
This unpredictability, he said, is part of what has led to a more constrained funding environment.
“Companies know they’re likely not going to have as easy of a time raising their next round. Their leadership and boards are asking them to constrain their spending and hold onto their resources.”
Mullings added that though a lack of financing may look bleak, it is likely only temporary until the economy stabilizes. He emphasized that there’s still a lot of money out there, even if it’s not currently being spent.
Lance Minor, life sciences national co-leader at accounting firm BDO USA, told BioSpace the tight market is also due to high interest rates from the Federal Reserve.
These rates are not likely to drop anytime soon. Federal Reserve officials are set to meet Wednesday to discuss another rate hike, after which the U.S. could see the highest interest rates it has seen in 16 years.
These rates, Minor said, affect how much cash can flow into the industry. With less cash flow, companies cannot afford the high salaries employees may have become accustomed to in recent years.
Minor said he expects the high interest rates to continue through 2023.
“It might not be until next year that the rates begin to soften a bit and there’s more cash flowing into the industry.”
Great Expectations
In terms of salary, the answer to whether an employee should lower their expectations depends in part on their area of expertise.
As BioSpace previously reported, stiff competition in the tech industry led to inflated pay, which eventually gave way to mass layoffs. Because of this, many who have left the tech industry and want to transition to biotech will likely have to take a pay cut if they want to get a job in the industry.
While those coming from the tech industry could see the most marked decrease in pay, they aren’t the only ones who may need to adjust their expectations. According to BioSpace’s 2023 U.S. Life Sciences Salary Report, average salaries for full-time employees grew at a rate of 3% from 2022 to 2023, a vast decrease from the 8% wage growth seen from 2021 to 2022.
The decision to take a pay cut also depends on each employee’s priorities and financial situation. BioSpace ran a poll on LinkedIn in April that asked those recently affected by layoffs if they would take a pay cut in their next role. Of about 1,100 respondents, 55% said they would not take a pay cut. In contrast, 12% said they would take a pay cut with no caveats, and 12% and 20% said they would take a pay cut if they were laid off for three months or six months, respectively.
Ultimately, Minor said companies will pay what they feel they can afford. He described the battle between employees and employers as a survival-of-the-fittest approach.
“Those companies that can afford to pay more, will,” he said. “Eventually, the rest [of the candidates] will have to lower their ask if they’re interested in sticking with their area of focus.”
