It often pays to switch jobs, and now is one of the best times to do it.
The pay difference between those who stay and those who changed jobs is growing, according to the Federal Reserve Bank of Atlanta. Job stayers, or people who stayed in their job for the past three months, increased their wages by about 4.7% as of June 2022. Meanwhile, those who switched jobs received a raise of 6.4%. The gap is the largest in two decades.
Workers are facing fast-rising prices on gas, groceries, rent and other essentials. Even in a tight labor market, many workers aren’t getting a large enough pay increase at their current job to keep up with inflation, say workers and economists who study the labor market. As a result, some Americans are reconsidering expenses they once considered affordable, while many also are looking for a new job with a bigger paycheck to keep up.
Prof. Yongseok Shin, an economics professor at Washington University in St. Louis, says inflation and the ability to get higher wages by changing companies are pushing many to move on. Some 47 million Americans have changed jobs in the past year, according to the Bureau of Labor Statistics.
“I think the workers are paying a lot more attention,” said Prof. Shin. “They are comparing their wage growth with the headline inflation numbers.”
Overall, the labor market remains strong. Employers added 372,000 jobs in June and the number of people changing jobs has consistently been elevated for much of the past year and a half. Researchers say more people are considering switching jobs now for more money.
Matt Schulman, a 30-year-old technology company communications manager, said he initially began thinking about switching jobs last summer as he and his wife prepared to move to New York from Philadelphia.
They knew the increase in rent and other expenses would strain their current budget, and Mr. Schulman decided getting a new job—and, crucially, a new salary—would be the best way to alleviate the financial stress. After three months of job hunting, in September 2021 he accepted a new gig at a new company.
The new job came with a 30% increase in pay.
“I finally felt I am caught up where I should be, whereas before I always felt I was playing catch-up,” he said.
Jennifer Dannals, assistant professor of organizational behavior at Yale University, said the recent group of job switchers is slightly different from past years. Traditionally, more people switch jobs because they are unhappy with their current role.
Now, more people are switching for more pay, she said.
Henry Munk, a college counselor based in Highland Park, Ill., said he recently changed jobs—moving from a charter school to an education startup—
both to improve his work-life balance and to increase his pay. The move came with a 15% salary increase, larger than any he had in his career prior.
“The No. 1 thing people want—to feel respected—is just a salary bump,” he said. “That keeps people happy.”
At companies hiring right now, there is almost a tacit acknowledgment that bringing in outside workers will now mean even bigger raises than in the past, say hiring managers. Some have tried other incentives, especially around remote work, but the question of pay is paramount.
And firms just have to move quicker, says Emily Larsen, director of human resources at 1upHealth, a health software company based in Boston.
“There are definitely places that are going to pay those really high numbers,” she said.
For those who switch jobs to earn more, there are considerable risks.
In recession years—most notably in the aftermath of the 2008 recession—job stayers posted greater wage growth than job switchers, as employers cut positions and those on the job hunt had far fewer opportunities.
Staying in the same job has other potential benefits: security, consistency and the potential for future advancement to leadership positions, said John Robertson, senior policy adviser and economist at the Atlanta Fed, in an interview last week.
Some workers are unwilling to trade off higher pay for other unknowns, including new responsibilities or a different work culture, he said. Others look ahead to the possible recession and fear that if they are the first to be hired at a new gig, they could also be the first to be let go if the company slashes staff.
Even for those who don’t switch jobs, there is a benefit from other people leaving their company, said Prof. Shin. When workers switch jobs, employers often re-evaluate their own payrolls and sometimes raise wages to compete for talent.
The downside is the inflationary impact of wages going up. Employers increasing wages to lure these workers can contribute to inflation, according to new research from the Federal Reserve Bank of Chicago.
“It will put some pressure on wages for even those who are not willing or not ready to switch their jobs, “ said Prof Shin.