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Now Is the Most Rewarding Time to Switch Jobs in Years

Pay raises for job hoppers are the biggest they’ve been in more than two decades, a sign of workers’ power despite hints of a cooling job market

By Ray A. Smith, WSJ

Sept. 5, 2022 7:00 am ET

Rarely has the payoff for switching jobs been greater than it is right now.

Labor shortages and inflation are lifting wages across the economy, particularly for workers changing employers. Those who recently left for a new employer netted an annual raise of about 8.5% as of July, up from 7.9% in June and the biggest median pay increase for job hoppers in more than 20 years, according to the Federal Reserve Bank of Atlanta.

The gap in pay raises for job switchers versus those who stay put is also the widest it’s been in decades: People who kept at the same job reaped a median annual wage increase of 5.9% in July, a slightly smaller gain than workers reported the month before, the Fed data show.

The raises that job switchers are commanding demonstrate the leverage workers continue to wield despite signs the job market is cooling somewhat. Motivated to fill open positions, many employers are willing to pay a premium for new hires, recruiters and economists say. Nearly 4.2 million U.S. workers left jobs in July, near the record highs of the past year, Labor Department data show—suggesting many workers remain bullish about their prospects.

Erikah Weir, 38 years old, got a 30% salary increase after leaving her business-support role at a research laboratory for an executive assistant role at a consulting firm in August. She had been looking for more flexibility and a salary she felt better matched her years of work experience—and found it in a new job.

“That makes me want to work as hard as I can to live up to the money that they’re paying me,” said Ms. Weir, who lives and works in Denver.

Other job switchers are netting double-digit percentage increases in pay, too. A new analysis of pay data for 10 million workers conducted by ADP, the payroll provider, shows the median wage increase for recent job changers was 16.1%, compared with 7.6% for those who stayed in the same jobs.

Still, there are risks for those who switch jobs to earn more, especially if the job market weakens in the coming months. Federal Reserve Chairman Jerome Powell warned in late August that the central bank would keep raising interest rates and hold them at a higher level until it is confident inflation is under control, even if it hurts the labor market and the overall economy. And now that employers have restored the millions of jobs they slashed in the first months of the pandemic, economists predict rehiring will slow in a number of sectors.

Those who jump to new jobs now could be among the first to be let go if their new employers cut staff, some economists say. Some recruiters say many white-collar professionals who jumped to new positions in the past year’s rush of job-changing have found that the roles are a poor fit or include the same frustrations as their last job.

People who have switched jobs for higher pay got bigger raises than those who stayed. Host J.R. Whalen is joined by WSJ personal-finance reporter Julia Carpenter, who discusses the differences in pay, risks job switchers face, and potential benefits of staying put.Read Transcript

Nearly three-quarters of workers who quit to take a new job said they felt surprise or regret, according to a survey of 2,500 U.S. adults conducted earlier this year by The Muse, a job-search and career-coaching company.

The problem is that pay for workers who stay hasn’t kept pace with rising prices on groceries, rent and other essentials. Consumer prices rose 8.5% in the 12 months through July, the last month for which inflation data are available, according to the Labor Department.

Nela Richardson, ADP’s chief economist, points out that wage growth for job stayers has largely plateaued since earlier this year. “The big action already happened,” she said. Job hoppers have been driving higher wage gains since, she said.

Inflation is spurring workers to explore new opportunities. In a July survey of 4,000 U.S. workers, one-third said inflation had become a “huge” factor in their career decisions, while another 46% called it a contributing factor, according to remote jobs-listing website FlexJobs.

Most people—60%—who switched employers between April 2021 and March 2022 saw an increase in their inflation-adjusted earnings, according to a recent analysis from the Pew Research Center. Among workers who stayed put, less than half did.

“Money is the most important thing right now,” said Jill Hernstat, who runs her own executive search firm in San Francisco. Inflation is one concern, as is equity-based compensation, given this year’s stock-market volatility. Among executives she contacts for job opportunities, their first question is usually, what’s the salary? “It never used to be like that,” she said.

At Chance Brown’s last job, as a principal systems engineer, he received a raise of just over 2%—not enough, he said, to keep up with his rising costs. “That doesn’t match inflation in a normal year,” the 32-year-old said.

Earning about $125,000 a year, he started looking for a job that would pay at least $160,000 and advance his career. He made a point to discuss salary early in the job-interview process, he said. In March, he started as a senior data engineer at a construction finance company in Knoxville, Tenn., earning $175,000.

“Everyone should know their worth,” he said.

Write to Ray A. Smith at Ray.Smith@wsj.com