The Waning Benefits of Job Switching in a Cooling Labor Market

One of the primary drivers of the “Great Resignation,” which saw over 50 million Americans leave their jobs in 2022, was the high demand for labor and the resulting increase in wages offered by employers struggling to fill positions. This trend made job switching highly lucrative, as workers who re-entered the job market were able to secure significantly higher salaries compared to staying with their current employers.

According to ADP Pay Insights, based on payroll transaction data from nearly 10 million employees in the United States, the median year-over-year increase in annual pay for job switchers was above 15 percent for most of 2022. In contrast, those who stayed in their current jobs saw an average pay increase between 7 and 8 percent—approximately half of what job switchers were receiving.

However, recent months have shown signs of a cooling labor market. Job openings have decreased from historically high levels, and fewer positions remain unfilled across various industries. As the balance between labor supply and demand stabilizes, wage growth naturally slows down. This deceleration has been more pronounced for job changers, leading to a smaller disparity between the pay increases of job switchers and those who stay in their jobs.

The above graphic provided by Statista illustrates this trend clearly. While there was an 8.8 percentage point difference between the pay increases of job switchers and stayers in April 2022, this gap narrowed to 2.8 percentage points by May 2024. As a result, the number of Americans quitting their jobs has also decreased significantly, signaling an end to the “Great Resignation,” one of the most surprising labor market trends in the post-pandemic era.

In summary, the initial benefits of job switching, which were substantial during the peak of the labor shortage, have diminished as the market cools. This shift is prompting more workers to stay with their current employers, reflecting a significant change in the dynamics of the U.S. labor market.