A few generations ago, it was common for people to stay with the same company for their entire career. At age 65, the loyal worker would get a gold watch and a pension and live out the rest of their life in relative comfort.
This scenario has changed so much as to make it nearly unrecognizable today. People change companies regularly, often because they seek an increase in their pay or their level of responsibility – or both. But lately, there has been an increase in people switching jobs because companies are paying new hires much more than their existing employees. Recent reports indicate this is now changing, and you may be better off staying at your current job.
Job Hoppers Still Making More Than Those Who Remain (But Barely)
According to ADP Research Institute, in April 2022, the average job switcher was earning 16.3% more than they did a year earlier at their previous position. In contrast, workers who stayed where they got a 7.5% raise on average. That’s a hefty increase under most circumstances, but keep in mind that inflation from April 2021 to April 2022 was 8.25%. So workers who stayed could earn 8.8% more by going somewhere else, and were — like everyone else — being pressured by significant inflation.
The numbers look quite different more recently. As of September 2023, the year-over-year wage increase observed by job hoppers rested at 9%, while growth seen by those who remained at their jobs held at 5.9%. At only just over a 3% difference, it appears that the incentive to swap jobs is shrinking when compared to earlier in 2023 (and years previous).
Further, a somewhat rebounding economy — the unemployment rate rested at a solid 3.8% as of September, per the Bureau of Labor Statistics — means it could be dangerous for one to leave their current job without having secured a second option beforehand.
Lessons Learned From the COVID-19 Pandemic
The pandemic showed workers that there can be much more to life than the job. It also taught many that working from home can be preferable to a commute. These two realizations have led to an increase in employees who are looking to have options in the way they work. While some people want to go back to the office full time, others want a hybrid arrangement so they can work from home some days and go to the office on others. Some people want to be fully remote. But everyone wants to have a choice — provided, of course, that their role allows it.
In any case, the revelation that working from home was indeed possible for workers in a number of industries has changed the playing field between employees and employers.
Retention Benefits For Both Employees and Employers
In sales, it’s often said that it’s much cheaper to retain an existing customer than it is to acquire a new one. The same thing is true for employment. When it comes to staffing, it’s usually cheaper to keep an existing employee than to hire a new one. Salary figures into this, of course, but so do other costs like onboarding, outfitting and training.
Even so, employers will often pay a premium for a new employee compared to an existing one for a few reasons. First, an employee will typically not leave their current job unless they can make more money elsewhere. Just as it’s more efficient for an employer to retain a worker rather than hire someone else, it can be more efficient for the employee to stay where they are. There may be a waiting period for new benefits to take effect, for example, or the employee may not be eligible for vacation time right away. There are also the logistical effects of switching jobs, which can include things like choosing a new healthcare plan or rolling over a 401(k) account. There’s also plain old inertia — if an employee is relatively happy in their current job, they’re likely to stay there unless they have a compelling reason to switch. That compelling reason is often money.
Should You Stay or Should You Go?
Clearly, there are a number of factors that you should consider if you are thinking about changing jobs, and salary is just one of them. What is the impact likely to be on your work-life balance? Would you be able to work the way you want — in the office, hybrid, or remote? Would you have more responsibility, and would a new position bring you closer to achieving your long-term career goals? These are all things to think about.
Another important thing to reflect upon is how the effects of inflation, unemployment and the cost of hiring impact your employer. Having a good grasp of these factors may help you negotiate a larger raise when it comes time for your annual review. If you meet with your manager armed with the facts about what it would cost them to replace you, you may find they are more willing to increase your salary by a bit more than they would otherwise. Beware of threatening to quit, however, unless you’re prepared to follow through if your concerns are dismissed.
Choosing whether to take a new job is a decision that shouldn’t be entered into lightly, and salary is but one part of the picture. That said, negotiating a fair salary, whether it’s a starting salary at a new job or a merit increase at an existing one, can impact your lifestyle for years to come, so do your research and due diligence before making the call.
More From GOBankingRates
- 11 Signs You're Struggling Financially -- and 3 Ways To Get Back on Track
- 11 Uncommon Investments That Can Actually Make You A Lot of Money
- 3 Things You Must Do When Your Savings Reach $50,000
- The 4 Fastest Ways To Destroy Your Credit