It literally pays to switch jobs. A new study, conducted by payroll giant ADP, reports that employees who accept a new job at another company receive more money than their former peers who remain. The higher premiums currently being offered indicate that the record-high level of employment and robust economy continues to grow. To attract top talent in this hot market, companies are starting to recognize that they need to pay a premium.
According to an analysis of the data by Bloomberg, the biggest beneficiaries are job hoppers in the information industry who realized 9.7% annual wage growth, construction workers with an 8.7% increase and professional and business services with an 8.3% premium. Those who stayed at their companies earned about a 4% increase in pay. On average, those who choose to switch jobs enjoyed compensation growth of 5.3%. The only large groups that suffered from falling wages—when changing jobs—were in the leisure and hospitality sectors. Small businesses are suffering, as they are not able to financially compete with salaries offered by their bigger adversaries in the war for talent.
Separately, data produced by The Federal Reserve Bank of Atlanta’s Wage Growth Tracker, which includes both the public and private sector, arrived at the same results as ADP. The study reveals that job switchers’ income jumped 4.5%, the second-best pace of the 10-year economic expansion.
Anecdotally, in my recruiting practice—placing professionals on Wall Street and in financial services over the last 20 years—I’ve seen firsthand increases of 10% to 20% on average for people who’ve switched jobs. The spread is due to the hotness or coldness of the market at a particular time period, supply and demand imbalance of candidates and other factors. With these large margins, it was highly attractive for people to jump ship. Many moved a number of times. Let’s say there was a person earning $100k and then received a $120k offer. A year later, she could embark upon another job search and request around $150k. Meanwhile, those who stayed put had what we recruiters refer to as the “loyalty discount.” The woman who maybe five years later—after several moves—earns over $150k (plus bonus), whereas her former peers earned about an average 3% in yearly raises, which places them at about $115k.