Wage Expectations Mirage

Job Market Mirage: Why Wage Expectations are Skewing Your Search

Jordan Keane in Business & Economy December 2025 • 4 min read.

"Unrealistic wage expectations can prolong unemployment. Are you falling into the optimism trap?"

The job search is a minefield of uncertainties. Beyond the stress of applications and interviews, unemployed workers face a significant challenge: accurately gauging their worth in a constantly shifting market. Research increasingly shows that job seekers often hold biased beliefs about their potential earnings, leading to prolonged periods of unemployment and missed opportunities.

A recent study delves into this phenomenon, dissecting the accuracy of wage expectations among job seekers. By comparing subjective beliefs with objective benchmarks derived from administrative and survey data, the study uncovers a widespread tendency toward overoptimism, particularly among those who can least afford it. Let’s unpack these findings and explore how they impact your job search.

This article explores the key findings of the study and offers actionable insights to help job seekers navigate the complexities of the labor market with greater clarity and realistic expectations.

The Optimism Bias: A Widespread Phenomenon

The study reveals a significant gap between what job seekers expect to earn and what the market suggests they are actually worth. On average, job seekers overestimate their potential reemployment wages by about 17%. This "optimism bias" isn't uniform; it's particularly pronounced among individuals with lower objective earnings potential.

Those in the bottom 10% of the objective benchmark distribution – meaning their skills and experience suggest they should expect lower wages – overestimate their potential earnings by a staggering 36%. Conversely, those in the top 10% exhibit a more modest overestimation of around 6%. This suggests that the individuals who are already at a disadvantage are the most likely to have unrealistic expectations, which further hinders their job search.

Low-Earning Potential: Job seekers with fewer qualifications and experience tend to overestimate their market value.
Anchoring Bias: Many job seekers "anchor" their expectations to their previous salary, even if the market has changed or their skills have depreciated.
Limited Information: Job seekers often lack complete information about the job market, leading to inaccurate assessments of their worth.

This data highlights that the optimism bias isn’t merely a harmless delusion but a tangible obstacle that can impede successful reemployment. By having a clearer, more accurate view of what they can realistically expect to earn, job seekers are empowered to make more informed decisions.

The Path to Realistic Expectations

Understanding the biases that affect wage expectations is the first step toward a more effective job search. By embracing a realistic outlook, job seekers can avoid the pitfalls of overoptimism and increase their chances of finding meaningful and sustainable employment. It requires a shift in perspective, a willingness to adapt, and a commitment to continuous learning and self-assessment.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2309.14044,

Title: The Accuracy Of Job Seekers' Wage Expectations

Subject: econ.gn q-fin.ec

Authors: Marco Caliendo, Robert Mahlstedt, Aiko Schmeißer, Sophie Wagner

Published: 25-09-2023

Everything You Need To Know

Why do job seekers often struggle with accurately assessing their worth in the job market, and what impact does this have?

Job seekers often struggle due to factors like "optimism bias", where they overestimate their potential earnings. This bias is more pronounced among individuals with "low-earning potential". Furthermore, cognitive biases such as "anchoring bias", where expectations are tied to previous salaries, and "limited information" about the current job market contribute to inaccurate self-assessment. This leads to prolonged periods of unemployment and missed opportunities as they pursue unrealistic wage expectations.

What is "optimism bias" in the context of job searching, and who is most likely to exhibit it?

In job searching, "optimism bias" refers to the tendency of job seekers to overestimate the wages they can realistically expect to earn. Research indicates that individuals with "low-earning potential" are more prone to this bias, overestimating their potential wages by a larger margin than those with higher earning potential. Specifically, the study highlights that those in the bottom 10% of the objective benchmark distribution overestimate their potential earnings by approximately 36%.

How does "anchoring bias" affect wage expectations during a job search, and what are its implications?

"Anchoring bias" occurs when job seekers base their wage expectations on their previous salary, even if the market conditions or their skills have changed. This can lead to unrealistic expectations if the previous salary doesn't align with the current market value for their skills and experience. The implications are that job seekers might reject offers that are actually fair and competitive, prolonging their unemployment. Addressing this bias requires researching current market rates for comparable roles and adjusting expectations accordingly.

Besides "optimism bias" and "anchoring bias", what other factors contribute to job seekers having unrealistic wage expectations?

Besides "optimism bias" and "anchoring bias", "limited information" about the job market significantly contributes to unrealistic wage expectations. Many job seekers lack comprehensive data on current salary ranges for their desired roles, industry trends, and the demand for specific skills. This lack of information leads to inaccurate self-assessments and inflated wage expectations. To combat this, job seekers should actively research salary data, network with industry professionals, and consult resources like salary surveys and career counselors to gain a more accurate understanding of their market value.

What practical steps can job seekers take to overcome the "optimism bias" and develop more realistic wage expectations during their job search?

To overcome "optimism bias" and cultivate realistic wage expectations, job seekers should take several practical steps. Firstly, conduct thorough research on industry benchmarks and salary data for comparable roles. Secondly, seek feedback from career counselors or mentors to gain an objective assessment of your skills and market value. Thirdly, be open to adjusting your expectations based on market realities and consider factors such as company size, location, and benefits package when evaluating job offers. Fourthly, focus on continuous learning and upskilling to enhance your marketability and justify higher wage expectations in the long term. Finally, remember that the study suggests a significant overestimation particularly affects those with lower earning potential, so targeted efforts in these areas are crucial.