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By the end of 2022, a tough economic environment was already prompting U.S. tech companies to reduce their workforces, some by the tens of thousands. Given that 2023 started with continued economic volatility, it’s reasonable to wonder: Does the notion of “hot jobs” still exist?
The short answer is “yes.” The increase in hybrid work environments and accelerated digitalization have made certain skills critical across industries. This makes it important for HR and compensation professionals to understand and pay for these skills appropriately and competitively while ensuring the most cost-effective rewards strategies.
Defining and identifying hot jobs
Deciding which jobs are hot in the talent market requires a broad view that takes several factors into consideration. While gut instinct based on headlines or an increase in job openings for certain roles among your competitors may seem like a good approach, there is a data-based way to intelligently target the jobs that are in highest demand.
WTW has developed a systematic methodology to identify which jobs are hot and to quantify how hot an individual job is. This methodology also supplements traditional metrics (e.g., highest-paid job) across four dimensions that are based on data from WTW’s U.S. General Industry Middle Management, Professionals and Support Compensation Survey:
Jobs are considered “hot” in the WTW methodology when they rank among the top 15% across several individual indicators. Additionally, a combined heat rank is calculated to provide an overall measure of heat.
Different jobs are hot in different situations
The past three years have shone a harsh light on the fact that not all industries and jobs are affected the same way when different external factors present themselves. For example, COVID-19 highlighted the importance of frontline employees – the workers who really needed to show up and get the job done.
This is clearly demonstrated in our January 2023 Hot and High-Demand Jobs Report, which includes data from 2020, 2021 and 2022. Insights into these full-pandemic years show an interesting change in which jobs were considered hot in January 2022, which included data from 2019, 2020 and 2021.
Figure 1. Top hottest disciplines, P3 career level
Ranking is based on a combined metric comprised of the discipline rank for: annual base salary percent increase, 3-year average base salary percent increase ("sustained pay increase"), incumbent count percent increase, and its pay position within a career level.
The No. 1 rank for Information and Cyber Security Strategy roles was driven by its high ranking for pay increase and surge in demand. No. 2 ranked Artificial Intelligence Application roles, ranked high among top paying disciplines and those with sustained pay increases.
We observed a surge in the demand for manufacturing roles. Considering the top 15% of hottest work areas in terms of average incumbent count movement, roles in manufacturing exhibited a 508% increase on average. This is followed by jobs in Sciences and Development with a 239% increase and Engineering/Technical Specialty with a 220% increase. See Figure 2.
Figure 2. Average incumbent count movement by work area
We suspect the increases are driven by more companies bringing manufacturing jobs that previously were exported to foreign countries back to the United States. This reshoring of jobs became increasingly popular because of persistent, pandemic-driven supply chain disruptions, an increasingly adverse geopolitical environment (trade wars and tariffs), and support for domestic production and research like that provided by the CHIPS and Science Act.
Use pay data to decide how to best invest your salary budget
Unusually high inflation and tight labor markets around the world have significantly affected salary budgets. You must be extremely thoughtful – even conservative – about changes you make to your compensation spend to see a maximum return on investment. Avoid making sweeping changes (e.g., broad salary increases) that will be difficult to maintain in an economic downturn. Instead, develop a segmented pay strategy for various employee populations and allocate your investment to attract and retain critical skills.
The pay premium for high-demand, specialized jobs in the U.S. can be substantial compared to a generalist role. The top 5% hottest disciplines commanded premiums of up to 12%, according to the January 2023 Hot and High-Demand Jobs Report. See Figure 3.
Figure 3. Median discipline premium by combined heat tier
Additionally, annual incentive plans and bonus payouts often are used to retain talent with critical and high-demand skills. This is seen in disciplines in the top heat tiers, which reflect significantly higher actual bonuses – 35% or more, on average, when compared to other jobs. See Figure 4.
Figure 4. Median actual annual incentive by combined heat tier (USD)
Make defensible decisions based on the timeliest intelligence
Without a structured quantification of the heat felt around individual jobs, rewards professionals have no way to differentiate – or defend – their programs in response to objectively measurable hot jobs. By identifying market heat early, organizations can devise and deliver mitigation strategies (e.g., hiring early, strategic upskilling efforts). And detecting market heat around certain jobs will be critical as the talent market continues reshaping itself in a new business landscape.
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