Why Switching Jobs Doesn’t Pay
Americans have been leaving their jobs at an unprecedented rate in 2021, with 26 million quits and counting through July. They’re finding new roles that match up better with their purpose, promise big promotions, or are just closer to home. What they aren’t finding, it seems, are particularly large salary hikes.
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. Andy De Marco, Korn Ferry’s vice president of human resources in the Americas, says given the historic labor shortage and increased negotiating power of workers, he would have expected the increase to be bigger. “It seems like a low number.”
Moreover, compared to the 3.1% average wage increase for people who have been in the same position for at least a year, it looks even lower. “The gap between switchers and stayers is unusually small,” De Marco says. To be sure, he adds, high-potential talent could probably stay with the same company and get an equivalent increase through merit and promotion as those who switch jobs.
The data does show the payoffs were better in certain industries and roles. Job switchers in information and professional services, for instance, had wage increases of more than 9.5%, while those in finance saw gains of 7.8%. In terms of size, firms with 1,000 or more employees are paying more to entice people to switch, with average wage increases of 6.9%. Female job switchers are seeing greater gains than their male counterparts—6.4% versus 5.5%—while demographically those in the 25–34 age group are getting 9.8% increases to switch jobs.
Still, even these gains are below the 10%–15% salary increase that experts say is typical of taking a new job. One factor could be many people are moving to equivalent-level jobs instead of bigger roles with more responsibilities, says Benjamin Frost, a solution architect in Korn Ferry’s Products business. He says the rule of thumb is 10% more salary for 10% more responsibility. “This data suggests people are switching companies rather than moving for a step up,” he says.
As concerned as leaders are with wage-related inflation—and they are very concerned, with Bank of America noting that mentions of increased labor costs on earnings calls are up 107% so far this year—they should also worry about people leaving not just for money, says Bradford Frank, a Korn Ferry senior client partner in the firm’s Global Technology practice. Frank says the data is a clear indication that people are leaving for roles that feature better working conditions and companies that align more with their personal interests. “This reinforces the idea that people want to work for companies that have purpose and offer flexibility,” says Frank.