People who switch jobs earn more money, report finds

Photo (c) Peter Dazeley - Getty Images

Employers are being forced to pay more to fill jobs

There was a lot of job-switching in recent months as the coronavirus pandemic prompted millions of people to move and make major life changes. It turns out many people who changed jobs earned more money.

A report from ADP shows that overall wage growth in the third quarter of this year rose 3.3%. But people who changed jobs during that period saw their wages grow twice as fast, at 6.6%.

Nela Richardson, chief economist at ADP, says wage growth has begun to match pre-pandemic levels for all employees. What stands out is the sharp increase in pay for people who quit jobs to take new ones.

 "As the economy continues to regain lost footing due to the pandemic, we are seeing pockets of unevenness in wage growth across the workforce as employers continue to offer competitive compensation, as well as in sectors such as leisure and hospitality which reported the greatest employment gains,” Richardson said. “Further, females switched jobs at a higher rate than men and outpaced their male counterparts in wage growth and job switching wage growth, though from a lower wage level."

Labor shortage gives employees more leverage

The labor shortage may be contributing to the trend. Employers are struggling to fill open jobs and are having to offer increased compensation to attract qualified workers. As employers increased their hiring, wage growth was positive across almost all sectors. The biggest wage gains were in trade, professional services, and construction.

Leisure and hospitality saw the biggest job gains, with 15% employment growth. The sector is slowly recovering from the major layoffs during the pandemic. 

The data suggests that employers are filling jobs with people they have attracted from other organizations, not from the ranks of the unemployed. Job switching increased from the previous quarter from 5.8% to 6.6%. 

Who’s getting hired

People aged 24 and under got hired the most, followed by people over age 55, possibly reflecting those rejoining the workforce in recent months. ADP said female wage growth jumped by 4.5%. That’s partly because they are coming from a lower wage, while the increase for men has been much more subdued, only at 2.4% in September 2021.

Before the pandemic, job switchers normally saw only a $5,000 to $10,000 a year bump in pay. During the pandemic, the rewards for people who leave one job for another have been larger, especially women.

Data from LinkedIn shows that job transitions for women have risen 54% when compared with 2020, which is a record. Men have also been on the move but at a slightly slower pace, increasing 46%.

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