Job switchers are the big winners in the pandemic labor market
Workers who changed jobs in the pandemic are getting better paychecks than those who stuck with their employer.
Job switchers saw their wages grow 5.8% year over year in June, while job holders experienced a 3.1% gain, according to a report by ADP derived from payroll data of 18 million workers. Overall, wage growth decelerated from the first quarter, while still growing 2.3% in June compared with a year earlier.
“There's been momentum in wage gains when it comes to job switchers,” Nela Richardson, chief economist at ADP, told Yahoo Money. “We're seeing with the latest second-quarter data a growing comfort in moving within jobs and within industry.”
To attract talent, employers are offering more competitive compensation and benefits, boosting wage growth among those who change jobs, according to Richardson. Some regions and industries saw larger gains in wage growth than others.
Job switchers in the Northeast and the West recorded the biggest wage growth of 8% and 7%, respectively, while those in the Midwest saw only a 3% increase in wages over the last year. When it comes to industries, job switchers in resources and mining, information, and finance saw the largest gains of 11.8%, 9.8%, and 7.5%, respectively.
“Some industries were barely tapped by the pandemic like finance, information technology,” Richardson said. “You can expect the competition for talent in those industries is much stronger than others.”
‘Not seeing that same healthy outlook’
While leisure and hospitality has thee highest job-switching rate of 26% of all sectors, it experienced the smallest wage growth.
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It's also the only sector that saw no gains for both job switchers and holders. Wages for those who remained at their jobs dropped by 1.4% from a year earlier, while wages for those who switched jobs declined by 1.3% for the same period.
“In those pockets of the economy that were slammed by the pandemic, you're not seeing that same healthy outlook by employees,” Richardson said. “The story of recovery is not whether you hold your job or you switch jobs, you're going make less money. That's not a healthy labor market.”
However, the Labor Department's Employment Cost Index showed that wages and salaries increased by 6.1% for the leisure and hospitality sectors in June from a year earlier. But Richardson pointed out that the Bureau of Labor Statistics relies on surveys of employers, rather than payroll data like ADP’s report.
The rate at which workers quit their jobs reached a record high in April and remained elevated in May, while the number job openings hit a historic high. The high level of job changes may be here to stay for some time, according to Richardson.
“It'll be with us for a while, it's going to be part of the recovery process,” she said. “It's emblematic of an economy that's increasing in its health and resiliency. That is a good indicator that people feel confident to switch first of all, and secondly that there are returns in doing so.”
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova