Lower-paid American workers are increasingly leveraging job changes to secure their largest pay raises in years, according to recent research. A Bank of America Institute report found that workers who switched employers experienced an average pay increase of 12.5 percent in July, the highest surge linked to job mobility in over three years.
This trend is particularly pronounced among workers paid weekly, who are more likely to be hourly employees and come from lower-income households. These workers have seen their after-tax wages rise by 4.7 percent in August compared to a year prior, a faster rate than the 3.5 percent increase for higher-income households.
The findings suggest a rise in labor mobility, with employers compelled to offer higher compensation to attract and retain staff. Economists note this trend indicates a narrowing wage-growth gap between lower- and higher-income Americans. Historically, lower-paid workers are concentrated in sectors like leisure and hospitality, retail, and transportation, which often feature lower wages and limited advancement opportunities. However, the current labor market appears to be shifting this dynamic.
While the rate of job switching remains below the peak of the "Great Resignation" in 2022, it is increasing. This movement is significant as the federal minimum wage has remained stagnant at $7.25 per hour since 2009. Anecdotal evidence from online forums suggests dramatic financial differences for those who switch jobs, with some reporting pay increases of 40 percent or more, allowing them to transition from roles earning around $60,000 to nearly $86,000, and in some cases, significantly higher.
This contrasts with the smaller annual raises typically offered by long-term employers. Economists suggest that job switchers often move into better-paying positions or roles with greater responsibilities, contributing to larger pay bumps. Employers' struggles to find workers with specific skills, particularly in fields influenced by the expansion of artificial intelligence, are also contributing to jobseekers' increased bargaining power.
However, the dynamic differs for some white-collar professionals. In sectors like technology, finance, and consulting, workers are sometimes described as "job hugging" due to fewer opportunities elsewhere and a perceived glut of candidates for certain roles, which reduces their leverage for higher pay. This creates a contrast where lower-paid hourly workers appear to have more freedom to move and negotiate, while some highly paid professionals are staying put.
It is important to note that the 12.5 percent figure represents an average pay change associated with job switching and does not guarantee such an increase for every worker. The data also tends to reflect those who successfully secure new positions rather than all individuals who seek them. Nevertheless, the trend underscores that for many of America's lowest-paid workers, changing employers may offer the most direct path to significantly improved earnings in the current economic climate.