Wages Are Up, But Switching Jobs Remains Best Way to Pay Raise

May 3, 2016 – Employers appear to be reacting to a tightening labor market by boosting wages to retain talent, this according to recruiters, talent acquisition professionals and the recently released ADP Workforce Vitality Report.

ADP tracked a set of full-time workers to determine wage growth among those who are consistently employed. This set of workers falls into two categories: job holders and job switchers. Job holders are those who stay in the same job, and job switchers are those who change jobs.

Wages for full-time job holders rose 4.6 percent year-over-year in the first quarter, up from an increase of 4.1 percent in the fourth quarter. However, job switchers’ growth rate slowed slightly — to six percent in the first quarter from 6.2 percent in the fourth quarter — though they still maintained higher wage growth than holders.

“Year-over-year wages grew substantially for job holders in the first quarter of 2016, rising from 4.1 percent in Q4 2015 to the current 4.6 percent,” said Ahu Yildirmaz, head of the ADP Research Institute. “This may be a signal that continued employment growth is leading to a smaller pool of available talent, in turn motivating employers to increase wages to retain experienced workers.”

Workers under 25 posted the most robust wage growth, up 9.2 percent among job holders and 11.1 percent among job switchers, while those age 25 to 34 also outperformed the older demographics.

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Wage growth for full-time job holders accelerated in every industry in the first quarter, with the exception of natural resources and mining. The highest acceleration occurred in information, where the growth increased by 0.8 percentage points from last quarter on a year-over-year basis.

Other industries that have experienced strong acceleration in wages include leisure / hospitality, finance and trade. In the case of leisure / hospitality and trade, the implementation of higher minimum wages in some states and municipalities may have impacted the first quarter wage growth. Leisure / hospitality wage growth accelerated to 5.7 percent over the past four quarters, while trade wage growth accelerated to 4.3 percent.

Here is a closer look at wage growth for full-time job holders from the fourth quarter of 2015 to the first quarter of 2016:

• Information: To 6.4 percent from 5.6 percent;

• Leisure and hospitality: To 5.7 percent from 4.2 percent;

• Finance and real estate: To 5.3 percent from 4.3 percent;

• Professional and business services: To 5.0 percent from 4.1 percent;

• Manufacturing: To 4.7 percent from 4.3 percent;

• Construction: To 5.1 percent from 4.4 percent;

• Trade, transportation and utilities: To 4.3 percent from 3.9 percent;

• Education and health services: To 4.1 percent from 3.7 percent;

• Natural resources and mining: To 0.6 percent from one percent.

The status of the job a worker switches from matters. If the change is from a full-time job to another full-time job, across all industries except natural resources and mining, switchers experience moderate to high growth in their hourly wages.

On the other hand, moving from a part-time to a full-time job across the industries generally resulted in a decrease in hourly wage. This may reflect that, when switching from part time to full time, the availability of benefits, more hours leading to increased take home pay and the stability of a more permanent job weigh more heavily than the hourly wage alone.

Despite wages being up, it’s no wonder workers still seem to feel that they need to change jobs to get a decent pay raise.

More than half of employees globally (56 percent) believe they must switch companies in order to make a meaningful change in their compensation, according to the ‘Global Salary Transparency Survey‘ released by Glassdoor.

Among U.S. employees, Millennials aged 25 to 34 (57 percent) and Generation X’ers aged 35 to 44 (58 percent) and those aged 45 to 54 (53 percent) are more likely to believe they need to change companies to make more money compared to those 55 and older (32 percent).

Overseas, more employees in France (64 percent) feel they must switch jobs to obtain meaningful compensation changes than those in all other countries surveyed except Germany.

According to a study released by Penna, 48 percent of people claimed the main reason for a job change was that they were searching for better pay and benefits. Of those, the survey found that employees aged 18 to 24 were the most likely to be planning a move this year, while 25 percent of those aged 25 to 34 are considering leaving their posts.

And with hiring remaining competitive, companies may be feeling increased pressure to stay competitive with compensation.

A recent study by CareerBuilder revealed that while 25 percent of employers anticipate no change in salary levels in the second quarter compared to the same period last year, 25 percent expect to boost salaries by at least five percent. Forty-four percent anticipate there will be an increase of four percent or less while two percent expect a decrease and four percent are undecided.

From the employee perspective, workers are confident looking ahead when it comes to the job market, job security and pay raises, according to Glassdoor’s first quarter ‘Employment Confidence Survey.’ Nearly half (46 percent) of U.S. employees expect a pay raise or cost-of-living increase in the next 12 months.

According to the Korn Ferry Hay Group ‘2016 Salary Forecast study,’ workers are expected to see wage increases of 2.5 percent, the highest in three years.

“This year’s global salary forecast shows that for the majority of countries real wage increases in 2016 are set to be the highest in three years,” said Philip Spriet, global managing director for productized services at Hay Group. “Differing macro-economic conditions means there are stark variations globally, but overall decent pay increases, coupled with extremely low (and in some cases, zero) inflation, mean that the outlook is positive for workers.”

Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media