Wage Growth May be Held Back by Workers Staying at Their Jobs
November 19, 2019
Even though unemployment is at the lowest level in decades, workers’ pay has been slow to rise. One possible culprit, according to the Wall Street Journal, may be that workers are not switching jobs as much as they previously. In the years following the financial crisis, unemployment gradually improved, but the rate of job switching remained low and still lags behind the decades before the financial crisis. Between 2000 and 2007, the share of U.S. workers who had been at their job for less than a year was about 25 percent. In recent years, from 2010 to 2018, that share has fallen to about 21 percent.
The most common reason to switch jobs is that pay is better elsewhere, but it can even increase wages for those who stay put. Employers will increase pay in an effort to retain workers. Some economists actually say that rather than unemployment, the level of job churn is a better indicator of wage growth, as well as inflation and productivity.