It’s a worker’s market: Job switchers landing better ‘real’ wages despite inflation | Courthouse News Service
Thursday, November 30, 2023
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It’s a worker’s market: Job switchers landing better ‘real’ wages despite inflation

Sixty percent of workers who switched jobs saw higher pay after adjusted for inflation.

(CN) — Most people who switched jobs this year found “real wage” salary increases despite inflation, according to the nonpartisan Pew Research Center.

Over the last year, the rate of resignation in the United States has risen to record highs, according to the U.S. Bureau of Labor Statistics, a trend referred to as the “Great Resignation.”

In a report released Thursday, Pew says the Great Resignation has gained significant momentum. Around 4 million workers, or 2.5% of the workforce, switched jobs monthly from January to March 2022.

This is an increase of two-tenths of a point from last year, and three-tenths above 2019 and 2020 norms. The report suggests that switching jobs is a compulsory incentive amid economic insecurity.

“[The] majority of workers switching jobs (60%) saw an increase in their real earnings over the same month the previous year,” the report states. “This happened despite a surge in the rate of inflation that has eroded real earnings for many others.”

The Pew study suggests half the workers who changed jobs experienced an actual increase in pay at 9.7% or more compared to last year. Meanwhile, the median worker who remained in the same position experienced a loss of 1.7%.

“There's some sort of selection going on here,” said Rakesh Kochhar, a senior researcher at Pew. “Workers are actively looking for higher pay and when they find it they switch their job. So that's why you're going to see that they're seeing real wage gains and jobs.”

According to the U.S. Bureau of Labor Statistics, April through June salaries increased 5.2% from 2021. However, the Consumer Price Index, which measures the average price paid by urban consumers for goods, rose a hefty 8.6%.

The numbers suggest job-switchers fared much better than those who remained with their employers.

Joshua Rosenbloom, an economics professor at Iowa State University, thinks the increase in actual pay is good, but people may turn over or stay for less monolithic reasons other than pay.

“It is certainly important for employers to reassess salaries, especially if they cannot recruit workers with the skills or experience that they require,” he said. “But wages are just one part of the package and it may be that greater flexibility about working from home, more vacation time, more flexible working hours or other benefits may matter more than higher wages.”

Workers likely won’t base their job decisions on salary alone, Rosenbloom said.

“The labor market is complicated by the heterogeneity of both jobs and workers,” he said. “Moreover, workers make commitments such as housing location, day care for children and other investments that are not easily adjusted.”

Additionally, Rosenbloom suggested employers may balk at being proactive at raising salaries for employees since it’s irreversible.

“The transaction between workers and employers is in this sense a bilateral monopoly within limits,” he said. “Workers won’t leave the moment their wage falls below alternatives, and employers don’t have to respond to every event in the market with wage adjustments. Since it is very hard to lower nominal wages, employers are reluctant to adjust wages and so wages are sticky.”

The Pew report also found the Great Resignation saw more job turnover among Black and Hispanic workers. In 2019, 2.5% of Hispanic workers sought new employment in a given month, compared to 3.1% in 2022. Black workers moved similarly from 2.6% to 3.1% in the same period.

White and Asian workers only saw a 0.1% increase in turnover during the same periods.

“We know that the most severely impacted businesses were retail establishments or restaurants and the hotel industry, and that provided that in-person service and those are in the field and with these particular workers,” Kochhar said. “They tend to be more concentrated in both industries, and that probably also contributed to the increase in job turnover among them more so than among other workers.”

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