After graduating, a friend-of-a-friend landed a job at a consulting firm. Two years later, she had switched jobs twice and was making three times higher pay than her original salary.
Stories like this one are common enough that job hopping has become a popular life hack for boosting pay. Allegedly, when you regularly switch companies, you can get a raise every time and end up earning nearly twice as much as you would if you stayed with the same organization. There are plenty of good reasons to switch companies (such as better promotional opportunities or culture fit), but can you quit your way to higher pay?
Job Hopping Isn’t for Everyone
For this study, we used 310,872 salary profiles collected between 2014 and 2017 for five very different job titles: registered nurse, software developer, administrative assistant, staff accountant and operations manager.
In each of these jobs, pay increases with both experience and with tenure (the number of years you’ve been with your employer). For example, a software developer with 9-10 years experience earns 43 percent more than someone who has no experience, and an operations manager who has been with a company for 9-10 years earns 35 percent more than someone who was recently hired. These statistics miss the mark, however. To uncover whether job hopping is more lucrative than loyalty, we need to look at how a loyal employee’s pay compares to a job hopper’s for similarly experienced employees.
Here we see how pay among workers with 9-10 years’ experience changes based on how long they’ve been at their company. Those with less than one year’s tenure are recent job hoppers, while those with 9-10 years tenure have worked at only one company. The bottom line: loyalty leads to higher pay for some jobs, but not all.
Software developers and staff accountants who have never quit earn 10 percent less than new hires, while operations managers and administrative assistants earn 21 and 19 percent more than new hires, respectively. For nurses, loyalty is neither a boost nor a drag on earnings.
Should I Stay or Should I Go?
The advantage of switching employers is that your wage gets reset to the market rate, but it comes at a cost: you lose the internal knowledge and relationships that make you effective at your company. For some jobs, like operations managers and administrative assistants, this internal knowledge is critical to success. However, software developers and staff accountants skills are transferrable, so organizational know how is less important. Wages for experienced software developers move so fast that companies struggle to keep up – seasoned developers can typically earn $9,600 more by jumping ship.
Employees: Do your research before quitting
Whether you’re leaving money on the table by sticking at your company depends on the labor market for your specific job. PayScale’s salary survey provides a personalized salary report, showing how other people with similar qualifications working in similar markets are compensated. You can use this information to decide whether you want to go on the job market this year, or leverage it in salary negotiations at your current employer.
Employers: Look to the market to set pay
For those who manage compensation on the employer side, there’s a lesson here, too: not keeping up with market rate compensation exposes you to retention problems. When policies peg compensation to an employee’s current comp level rather than to the market rate, that employee is likely to gain more by leaving your company than by remaining loyal. What’s worse, the employees with most to gain by job hopping belong to the most competitive labor markets. When you try to replace them you will be at a significant disadvantage if you cannot offer the market rate. In short, it’s better to pay the right way before these employees hit the road.