A typical job changer got a salary increase of almost 10%, according to a study
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According to a new study from the Pew Research Center, many workers who have recently changed jobs have seen their new pay increases significantly outpace inflation — by almost 10% or more.
The typical American who changed employers in the year from April 2021 to March 2022 saw their “real” wages rise 9.7% from a year earlier, according to Pew, a monitoring body. nonpartisan research, which analyzed federal labor data.
“Real” wages measure the evolution of a worker’s salary after taking into account inflation, which in June was at its highest level in more than 40 years.
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The figure cited by Pew represents the median, which means that half of the workers who changed jobs obtained a net salary increase of 9.7% or more. The other half of those who changed jobs received a smaller net increase or saw their net income decrease.
Workers have been quitting their jobs at high rates since the start of 2021 in a trend known as the Great Quit. Demand for workers has soared as the US economy has largely reopened from its pandemic-era hibernation, leading companies to compete by raising wages.
Workers who switched jobs reaped more financial benefits than those who stayed with their employers, Pew found. The median worker who stayed in the same job from April 2021 to March 2022 saw their earnings fall by 1.7% after adjusting for inflation, the study found.
The dynamic of higher wage growth for job changers relative to other workers was typical even before the Covid pandemic, but is likely stronger in today’s labor market given how quickly salaries are rising, according to Daniel Zhao, senior economist at career site Glassdoor.
“Workers have the most leverage when they go out and change jobs and find another employer willing to reset their salary to market level,” Zhao said.
Employers don’t have as much incentive to give big raises to employees who stay in their current jobs because it implies a willingness to stay put for their current salary, Zhao said. And employers usually only give raises once a year; someone who finds a new job basically gets an extra raise, he said.
The labor market, still hot for now, could cool down
A restaurant in Arlington, Va., had been hiring since June 3, 2022.
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However, data from the US Department of Labor released on Tuesday suggests that a slowdown in the labor market is underway, meaning workers’ bargaining power could also decline.
Job postings, an indicator of employer demand for workers, fell to 10.7 million in June, down about 605,000 from May, the agency reported. It was the third consecutive month of decline since March, when there were nearly 11.9 million job openings, a record, which means there may be fewer opportunities to move on. to a new job.
The Federal Reserve is raising borrowing costs in an effort to cool the economy and labor market to rein in stubbornly high inflation. Although it usually takes time for this monetary policy to work its way through certain sectors of the economy, employers may forego hiring plans in anticipation of a downturn, Zhao said.
“It looks like worker power over the past two years was probably strongest late last year or early this year,” Zhao said. “If the labor market continues to cool, we should also expect to see worker power cool.”
Despite this relative cooling, the labor market still seems to be tilted in favor of workers. Job vacancies remain well elevated by historical levels despite June’s significant decline. Layoffs have also fallen, meaning employers are clinging to their existing workers.
The level of voluntary departures (quitting) – another barometer of worker power – fell slightly from May to June, although, as with the level of job offers, it remains high in historical terms. However, departures in two sectors – finance and real estate – returned to pre-pandemic levels in June, suggesting that the big quit in those sectors has come to an end, Zhao said.
“At this point in the recovery of the job market, a decline in job openings is not a concern,” said Nick Bunker, economist at job site Indeed. “A decline in hiring intentions in the absence of a significant drop in actual hiring is a sign of a cooling labor market, but not a crashing market.
“The labor market remains hot,” he added. “A slow, continuous cooldown would be more than manageable.”