“Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.”
– Forbes.com
There’s a reason why the Smart Job Search System encourages employees to switch jobs every 2-3 years—it’s a strategy conducive to the new job market, but also the trend of employees receiving less and less in salary increase each year.
So why are employees—who are expected to perform more and be available more than ever before—being paid less than in recent history?
Like the author Cameron Keng said in Forbes article quoted above, the reasons for this are many. The main one has to do with the “norm” of company’s freezing payrolls during recessions. This tactic stopped being an exception and became a rule in the last decade—recession or not. Keng explains:
“Recessions allow businesses to freeze their payroll and decrease salaries of the newly hired based on “market trends.” These reactions to the recession are understandable, but the problem is that these reactions were meant to be “temporary.” Instead they have become the “norm” in the marketplace. More importantly, we have all become used to hearing about “3% raises” and we’ve accepted it as the new “norm.””
Keng goes on to clarify further, quoting John Hollon:
“John Hollon, former editor of Workforce.com, remembers when “5% was considered an average annual pay increase.” The amount of fear the media created surrounding the recession and its length has given companies the perfect excuse to shrink payroll and lower employee salary expectations in the long-run.”
And that is why the average raise an employee receives is far below what they would receive if they just gained a new position.
If you just do the math, it’s pretty simple. Changing jobs is a smarter move—not just now, but for the entirety of your career. By switching jobs more often and thus increasing your salary every time, you’re exponentially making more money over the course of your career.
And while Keng’s article is four years old, the numbers have not changed. In fact, in late 2017 Kiplinger released a report that predicted the average raise in 2018 to be 3%—exactly the same numbers as the Forbes article. The management consulting firm Korn Ferry’s forecast was equally as dismal — coming in at 2.8%—with North America in the lowest three salary increases of all the global regions.
Unfortunately, 2019 is not looking more promising either. The Society for Human Resource Management states:
“Salary-increase budgets for U.S. employers next year are projected to grow by just 0.1 percent above the actual average budget increase for 2018, confirming that wage growth remains surprisingly stagnant despite record low unemployment.”
However, that low record unemployment plus a thriving job market are good news…if you’re ready and willing to change jobs.
Keng says:
“The average raise an employee receives for leaving is between a 10% to 20% increase in salary. Obviously, there are extreme cases where people receive upwards of 50%, but this depends on each person’s individual circumstances and industries.”
Case in point: if you receive a 10%-20% raise by quitting, and you switch jobs every 2-3 years, you’re making hundreds of thousands of dollars more over the course of your working years. Alternatively, if you stay at the same company forever, you’re leaving that money on the table.
It’s all up to you, but know this: the current market provides an amazing opportunity to make enormous strides in your career—a better salary and quality of life is yours for the taking, if you so choose.
Earnings curve – age + “compound earning” – someone who switches jobs every 8-10 years VS someone who changes every 2-3 years. Compounding effect.
Pssst….If you’re ready to start looking for a new position, but don’t know where to start, check out our FREE course Dream Job Toolkit. And if you’re ready to find and land your dream job—STAT—enroll in Smart Job Search System. It may very well be the very best decision you’ve ever made in your career.
Outline:
Do the math
The Smart Job Search approach is to switch jobs every 2-3 years, and there’s a strategic reason behind that.
- The math behind switching: The average raise an employee receives for leaving is between a 10% to 20% increase in salary. With the extreme exceptions of up to 50%.
- With the current low unemployment rate, there’s even less risk of leaving your job for greener pastures.
The numbers haven’t changed in 4 years, so it’s time to act.
- Even though the cited article is a few years old, the numbers are still the same. In fact, Kiplinger released a report that predicted the average raise to be 3%—exactly the same numbers as the Forbes article.
- “Why are people who jump ship rewarded, when loyal employees are punished for their dedication? The answer is simple. Recessions allow businesses to freeze their payroll and decrease salaries of the newly hired based on “market trends.” These reactions to the recession are understandable, but the problem is that these reactions were meant to be “temporary.” Instead they have become the “norm” in the marketplace. More importantly, we have all become used to hearing about “3% raises” and we’ve accepted it as the new “norm.””
- Another source, The Society for Human Resource Management, Korn Ferry
- Employers trying to make up for this through health care, so if that’s an important thing for you, make your choice strategically (find a better job that matches the health care plan )
The promotion myth
- Bethany Devine, a Senior Hiring Manager in Silicon Valley, CA who has worked with Intuit and other Fortune 500 companies “Once you are entrenched in a company, it may become more difficult to be promoted as you may be waiting in line behind others who should have been promoted a year ago but were not due to the limit. However, if you apply to another company, your skills may match the higher title, and that company will hire you with the new title. I have seen many coworkers who were waiting on a certain title and finally received it the day they left and were hired at a new company.”
- Evaluate your position – do people actually climb the ladder? Are you seeing people get promoted?
Conclusion: your worth
- Hiring a single employee who is able to perform even 10% more efficiently is worth at least a 25% increase in salary. Companies spend a lot of money to pay recruiters, human resourcing to conduct background checks and the time of existing employees to hire and train new people. It’s always cheaper to just hire better people and pay them more. – Cameron Keng
