- New analysis from RBC Capital Markets shows US workers who quit their job voluntarily to work elsewhere have enjoyed significantly faster pay increases in recent years.
- While US labour market conditions are significantly tighter than in Australia, they are tightening nonetheless. That trend is expected to continue.
- The RBA says Australian business recognise larger pay increases would benefit the broader economy, but not their individual firm. That suggests workers may need to push aside security and certainty in order to boost their pay.
If you’re looking for a larger pay packet, perhaps you should quit where you’re working now and find another job.
As seen in the chart below from RBC Capital Markets, disloyalty appears to be working well for those in the United States.
Consistently, workers who have quit their job to work elsewhere have, on average, received faster pay increases than those workers who have stayed loyal to their employer over recent years. The pay gap between the two cohorts has also widened significantly since 2016, coinciding with a tightening in US labour market conditions over this period.
Unemployment sits near multi-decade lows and job openings at record-highs, seeing an increasing number of employees forgo the security of their current job in search of higher wages.
“[The] quitters are seemingly getting ahead,” says Tom Porcelli, Chief US Economist at RBC Capital Markets.
“In recent years wage growth for job switchers has accelerated well beyond that of stayers. At last look, switchers were witnessing wage growth of nearly 1% higher than that of their seemingly loyal brethren.”
With the level of monthly quits as a percentage of the civilian labour force hitting the highest level in 17 years in July, Porcelli expects those trends will continue ahead.
“In the current very tight labor backdrop, as the quit rate continues to accelerate toward prior historic highs, wages should move in concert,” he says.
Skill shortages are increasing and there’s fewer underutilised workers to fill job openings, so why not test your market value? The evidence suggests it will lead to faster pay increases.
The trends in the United States should not go unnoticed by workers in Australia, either.
While labour market conditions here are significantly looser than in the United States, helping to explain why average year-ended hourly earnings grew by a paltry 2.1% in June, they are still beginning to tighten.
At 5.3%, Australia’s unemployment rate sits at multi-year lows and job vacancies, as measured by the ABS, are at the highest level on record.
Should year-ended Australian economic growth continue to sit above 3% in the coming years, it’s likely labour market conditions will continue tighten, creating additional and more broad-based skill shortages across the economy.
The Reserve Bank of Australia (RBA) says there’s already signs that’s occurring.
“Firms are currently reporting a record number of job vacancies and increasingly telling us that it is hard to find workers with the right skills,” RBA Governor Philip Lowe said in Perth last week.
“One way of dealing with this increasing tightness in the labour market is, of course, to lift wages.”
However, Lowe also noted that many businesses he speaks to “recognise that a pick-up in overall wages growth would be a positive development from a macro perspective, although not from the perspective of their individual business”.
So while they acknowledge faster wage increases would be good for the broader economy, it wouldn’t be for their individual bottom line.
“There is a tension there,” Lowe said.
There is indeed, and one that suggests Australian workers, if confident enough to look elsewhere for employment, may be able to break.
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