Job-hopping doesn't pay what it used to
Changing jobs has long been the surest way to get a raise, a phenomenon that gained momentum early in the pandemic when the "Great Resignation" saw millions of workers quit their jobs and decamp to better-paying employers. But those days may be over.
Job-hoppers' pay gains are fading, according to a new analysis from Bank of America, which found that rates of job-switching are slowing and that workers are seeing fewer benefits from moving to a different company. More employees are staying put, and "we also find the pay raise that job movers are getting is declining," analysts at the bank said in a report, which drew on anonymized bank account data for the analysis.
Before the pandemic, people tended to see a roughly 10% pay bump from moving to a new employer, according to Bank of America. "Then, when the Great Resignation was in full swing this appears to have risen to 20%. But as of April 2023, pay raises moderated to 13%," the analysts wrote.
While part of that drop is related to inflation, which has cooled somewhat from its June 2022 peak of 9%, the falling raises may also reflect a looser labor market in which workers have less bargaining power than they did a year ago.
Government data backs up this narrative, with the Labor Department reporting this week that the rate of workers quitting their jobs fell to a two-year low. The quits rate in April fell to 2.4%, nearly matching its pre-pandemic level of 2.3%.
The drop "suggests that the labor market is slackening, despite the reported increase in job openings, and that workers are increasingly sheltering in place in their jobs as better alternatives become less available," ZipRecruiter chief economist Julia Pollak said in a note.
Similarly, the Federal Reserve Bank of Atlanta estimates that the pay increases of job-switchers have cooled somewhat from their peak last year.
The high-profile layoffs of the past year, which hit technology and finance companies particularly hard, could also be having a psychological effect on high earners, suggested Kate Duchene, CEO of the consultancy RGP.
"Maybe in light of all these layoffs, people are thinking about their own jobs and feel happy and grateful to be in a job," she said, pointing to a recent Conference Board survey showing job satisfaction at a 35-year high.
However, changing jobs can still lead to a big pay raise, Bank of America found. This year, the typical raise of a worker making less than $25,000 who switches jobs is over 35%, the bank found — well above the average pre-pandemic raise and nearly on par with the raises of 2021 and 2022.
Higher-paid employees are seeing the biggest drop in raises from job-hopping, with a worker making over $100,000 seeing an average raise of just 6% or 7% when they switch jobs, down from roughly 12% last year, according to the bank's figures. For people earning $50,000 to $100,000, raises have fallen to 10%, from about 15% last year, the research shows.
The six-figure set is contending with a significant job slowdown as companies in the technology, advertising, business services and finance sectors lay off staff. Unemployment payments have jumped most significantly among high-income households, Bank of America found last month, while the highest-paid workers are also seeing a significant rise in job disruptions — the term for a layoff or firing.
The data indicate that "the higher-income end of the labor market is softening much more significantly than the lower end," analysts wrote.