If you haven’t gotten much of a pay increase recently and are wondering if it’d be worthwhile to jump ship for a chance at better wages, Bank of America says to go for it if you’re young.
Millennials who switched companies saw after-tax wages grow twice as fast compared to those who stood still, bank data showed. Gen Z did even better, with the rate of earnings growth increasing fourfold, it said.
Although the pay increases job switchers may receive are significantly smaller than they were during the “Great Resignation” in 2022 after the COVID-19 pandemic, Bank of America said in a research note this is still a sign “the labor market may be gradually improving.”
“If the labor market continues to recover, we might see some increase in the pay premium for switching jobs, especially given the premium is currently lower than it was pre-pandemic,” the bank said.
How Much More Can People Expect to Earn From Switching Jobs?
Overall, job switchers saw after-tax and benefit wages grow 8%, better than the 5% increase by those who stayed in the first three months of this year from last year, Bank of America said. But the gap between the two is the smallest in seven years.
In contrast, when there was a labor shortage in 2022 because Americans were slow to return to work after the pandemic, workers were lured by nearly 18% pay jumps from the prior year for leaving their companies, compared to the 7% increase non-switchers received, the bank said.
Does Job Hopping Pay More for Some Than Others?
Since Gen Z is seeing the largest pay increases from job switching, it may not be surprising that they also have the highest rate of job switching. One in four changed companies in the first three months of this year, Bank of America said. That’s more than 10 percentage points higher than millennials and more than three times the rate of Baby Boomers but sharply lower than in 2022, data showed.
Older Americans – Gen X and Baby Boomers – were better off staying put in their jobs, the bank said. They saw flat or declining changes in pay from a year earlier, while workers in those groups who remained in their jobs saw steady pay increases, research showed.
“Some people in this generation may be taking similar or lower earnings as some are choosing to work less hours, perhaps as they approach retirement,” Bank of America said. “It could also be that some have taken lower pay after being laid off or fired.”
Switching jobs also didn’t pay for top earners, the bank said. Instead, “for this group, it appears that loyalty pays,” it said.
In the first three months of the year, those in the top 5% by income were the only group where job stayers saw stronger wage growth than job switchers, Bank of America said.
“In fact, the pay premium for switching jobs has declined the most for higher-income households, especially those in the top 5% over the past four years,” it said. The drop could be due to the general slowdown in higher-paying industries like finance, information technology and professional business services, it said.
“For example, those who lost their jobs may have to settle for less in a tighter job market, while those who remained are now seeing larger pay rises. It could also be that in a ‘low-hire, low-fire’ environment, companies feel they have less reason to pay a premium to job switchers,” Bank of America said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
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