CNBC recently reported that there is a link between job hopping and pay raises. How are these two linked? Well, workers' confidence is way up and with that comes job hopping. The U.S. Department of Labor has reported that 3.4 million Americans quit their jobs in June, a number not seen since 2001. With the unemployment rate at 3.9 percent, it's no wonder workers think finding a new job will be much easier than in the past. The economy is strong, and that means workers expect the best from their employers. They expect higher pay. Americans, especially millennials, are finding new jobs with raises that are nearly 4 percent from their previous job, according to the data from the Federal Reserve Bank. In general, hourly earnings jumped by 2.9 percent.
And They're Right
Workers are seeing monthly job growth around 215,000 jobs, the Dow up 19 percent over the past year, and the stock market reaching new highs. Based off of these observations, anyone would think the economy is booming. The only caveat in this flourishing market is wage growth. It hasn't moved as fast as we would think in this economic expansion. We have yet to break 3 percent, yet we are starting to see an upswing. Average hourly earnings are on a post-recession high. Something that matters greatly to workers. The bigger pay increases are seen mostly by job-hopping candidates that are typically younger and less established. They are seeing a higher wage growth (4 percent) than those who are staying at their job (3 percent). We're seeing this across industries and companies are fighting to keep the employees they do have, asking the question, "is it still more expensive to acquire new people than to keep current employees?" Last year, 6.5 percent of employees under the age of 35 had changed jobs compared to 3.1 percent of those 35 to 54.
Why is it happening?
Companies are having trouble finding talent in their areas, and so job seekers are in control when it comes to landing a bigger title, learning new skills, making more money, and demanding more from a company. It's a lot easier to do this in a tight labor market than one that has more wiggle room. It also changes the perception of job hoppers from unstable and disloyal, to adaptable and invested in growth.
There is a positive outcome for all workers here. If employees want to job-hop, they will probably see a wage growth around 4 percent, but if they decide to stay, more and more companies are investing in their employees by providing training and upskilling existing workers that increases the employee's value and qualifies them for higher wages.
If you'd like to read more on the trends, check out the CNBC article here.
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