As we have written about previously, the pandemic has had a lot of people reconsidering their current roles. We have seen many people voluntarily leave their jobs, with over 26 million people quitting last year. The reasons for leaving are also different, with people looking for jobs that fit a remote lifestyle or align with their personal purpose. Even with so many jobs open, changing jobs is not resulting in large salary increases. So does job switching pay?
According to a Korn Ferry article, “Wages for job switchers, or people who started a new job over the course of the year, are up just 5.8% from 12 months ago, according to the human resources management and payroll processing firm ADP. That isn’t even one percentage point greater than what switchers got in any year since 2017.”
With the historic labor shortage, this surprises Korn Ferry’s vice president of human resources in the Americas, Andy De Marco, “It seems like a low number.” He says, “The gap between switchers and stayers is unusually small.” He believes top performers could stay with their current organization and make as much or more through merit or promotions.
The data does have variations depending on the industry. For those in the information and professional services sector, the wage increase is nearly 10%. And the finance industry is realizing gains of nearly 8%. Additionally, larger companies are paying more to encourage people to join them, with an average wage increase of roughly 7%. Women are realizing gains of almost 1% more than men, and Gen Z workers are averaging increases of 9.8%.
While this may look like a good increase in wages, it is still less than the typical average for switching jobs, which is between 10% and 15%. One explanation may be that people are making more lateral moves instead of moving up when making a change.
The economy is doing well, and the labor market is recovering well. However, consumer confidence is not keeping pace. People are still concerned about inflation. Executives are concerned about wage-related inflation. According to Bank of America, the topic is being discussed on earnings calls 100% more often in the past year. Employees are also leaving for reasons other than money, such as improved work environments, more flexibility, and alignment to personal beliefs.
Wage growth compared to last year is still low, Q2 of this year is just 1.5% higher than last year. To get a better picture of the impact of the pandemic is to look at individual-level wage gains. This year is consistent with last year at 4.2%.
Switching jobs now may not include a large pay raise, but that doesn’t mean it might not help in the long run. Depending on why you are considering a job change to a different industry or to a role that aligns better with your long-term vision, it may pay dividends down the road. The pandemic has also accelerated a trend that began with tech startups that changing jobs more often is no longer as valid as it used to be. Making job changes today and ‘failing fast,’ if it is not the right role, are no longer as frowned upon as they once were.
If you have questions about switching jobs or about how to create a culture that reduces turnover, send us a note.