Want A Raise? You Might Have To Quit.
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The last time unemployment was this low was in the 1990’s. Yet pay raises for employees have yet to be commensurate with the economic recovery. Speaking to a number of business clients over the past few quarters they have begun to experience employees quitting for greener pastures.
My initial theory was that Millennials are different (which they are). But the data was showing otherwise. Employees of all ages might just be a whole lot smarter. The Federal Reserve reported that Americans who leave their employers to take on a new job are for the first time, in a long time are experiencing larger increases in their pay then if they stayed put. Those employees that leave are experiencing one third larger payouts. This is the widest gap since the Great Recession. In July wages for job switchers grew 3.8% from a year earlier, compared with 2.9% for those who stayed behind.
These numbers are still low compared to other recoveries. Before the recession job switchers received annual raises of nearly 5% but this phenomenon of job quitters was something that we actually saw coming.
One of the more interesting reports from the Bureau of Labor Statistics is the Job Openings and Labor Turnover Report or (JOLTS). The JOLTS report below began to show the uptick in employee quit rate starting back in late 2014-2015. Also as interesting, the rate of job openings exceeded the rate of hires in the economy during that same 2014-15 period. What this chart was telling us is that for the first time in 18 years there are more jobs available than people to fill them. And that existing employees are quitting at a record pace for better jobs and better pay.
This shortage of workforce is ultimately good for employees willing to shop around if their employers are not responding with wages increases. It is also good for the economy until it is not. At some point, the lack of a trained labor force will be a headwind for prolonged growth but in the meantime, if you want a raise and it’s not coming from your boss you might want to look elsewhere.
Having a firm of 40 people, I will say losing employees unexpectedly always hurts. Managers don’t like to be held up for surprise pay raises so I would suggest steering clear of “a raise or else” conversation. Better to bring to the table data like what I have shared above but more specifically for your industry, region and experience level. Have a plan for the growth of your job and the value you can bring to the firm. You may be surprised and most managers’ welcome proactive conversations.
If you have to leave, don’t take the first offer that comes along. If you have the skills, and in the right industry, you could be in the catbird seat right now so be selective. Be careful of the job listings you respond to. Take it from me; it might just be your employer doing their own research.
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