US Workers Switching Jobs See Higher Pay Raises Than Those Staying Put
Translated & summarized from Bizportal by baba
American workers who switched jobs in September saw an average annual wage increase of 4.7%, compared to 3.4% for those who stayed with their employers, according to the Federal Reserve Bank of Atlanta. This pay premium for job switchers has re-emerged after a period of little difference. However, factors like inflation and a more challenging job market, including increased use of AI in hiring, mean fewer workers can actually capitalize on this trend. In Israel, a similar dynamic exists where external hires are often paid more than existing employees.
The story in 5 lines · by baba
- US job switchers gained 4.7% in annual wages versus 3.4% for stayers in September.
- The pay premium for changing jobs has returned after a period of stagnation.
- Inflation and a tougher job market make it harder for many to benefit from switching.
- AI tools are increasing applicant numbers and lengthening hiring processes.
- Workers staying put are advised to develop AI skills and document achievements.
Americans who change jobs are now experiencing higher annual wage growth compared to those who remain with their current employers, according to the Federal Reserve Bank of Atlanta's wage growth index for September. The average three-month moving average shows job switchers gaining 4.7% annually, while those staying put saw a 3.4% increase. This marks a return to a trend where switching jobs offers a pay premium, after a period where there was little difference or even a slight advantage for staying.
The Atlanta Fed's index, based on the Current Population Survey in the U.S., tracks the same individuals over 12 months to calculate the median change in hourly wages. A "job switcher" is defined as someone who has changed employers, industry, occupation, or area of responsibility. In September, both figures saw slight decreases from the previous month, with switchers' growth dropping from 5% to 4.7% and stayers' from 3.6% to 3.4%. The overall index also declined from 4.1% to 3.9%.
Labor market economists suggest the first half of the year was unusual, with fewer hirings leading job seekers to accept offers with less advancement and lower pay. While the 1.3% difference in wage growth might seem small, it accumulates over time. An employee earning $70,000 annually would see an additional $2,400 if they stayed, but potentially closer to $3,300 if they switched jobs, with future raises calculated on a higher base.
However, the article notes that the decision to switch jobs is complex. The U.S. Consumer Price Index rose about 3.7% over the past year, potentially eroding the entire raise for those who stayed. Furthermore, the job market has become more challenging for switchers. The quit rate has remained low, well below the "Great Resignation" peak, indicating less worker confidence in finding better positions. AI tools also contribute to longer hiring processes by increasing applicant numbers for each role. In white-collar sectors, layoffs and more selective recruiters have made it harder for many to realize the pay premium associated with switching.
For those remaining in their current roles, career advisors recommend developing AI skills and documenting achievements to improve their standing and negotiating power. In a less dynamic market, recognized contributions can lead to better salary negotiations. When considering external offers, it's crucial to evaluate the entire compensation package, not just base salary. While Israel lacks a direct equivalent index, a similar dynamic exists where employers often pay more to attract external candidates than to retain existing employees, sometimes leading to pay disparities among colleagues.