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HomeBusinessEconomyHuge Pay Gap of Big Resignation Between Job Changers and Loyal Workers

Huge Pay Gap of Big Resignation Between Job Changers and Loyal Workers

How long have you worked for your current employer?

If your answer is several months, congratulations. There’s nothing to worry about. But if you’ve been with your company for more than a year, there’s something your manager doesn’t want you to know: You’re probably underpaid.

Over the past year, the hot job market has forced employers to hand out huge paychecks to lure new candidates – and this has created a deep divide between rookies and veterans at companies across the US. LaborIQ, a provider of wage data, estimates that salaries for new hires are, on average, 7% higher than those of people already employed in similar positions. For many in-demand professions in technology and finance, inequality is in the double digits. In The Great Resignation, longtime employees—those caught between good and bad times—pay a secret tax on their loyalty.

Employees start to capture. They bombard their employers with demands for raises. Or they leave for new, better-paying jobs, depriving companies of the people with the most corporate knowledge. Human resources departments know they have to do something about it, but the only real solution is expensive: Increase everyone’s wages to equal smuggled wages. This would be difficult to do, especially with budgets already exhausted by the cost of hiring new talent. The more you pay beginners, the less you have to pay old-timers.

Several companies are trying to bridge the huge disparity between those who stay at work and those who change jobs. Some are handing out mid-year bonuses to keep workers from looking elsewhere. Others increase companywide salaries — Microsoft announced last week it said it nearly doubled its payroll budget and handed out larger hikes from September. But many employers prefer a cheaper route: they hope to quietly get rid of discontent.

“Almost every company out there has to deal with this dynamic in some way,” said Jay Denton, LaborIQ’s chief labor market analyst. “Companies are struggling in every field. They are trying to catch up.”

Job changers and job stays

This isn’t the first time a booming job market has skewed corporate salaries. Compensation experts have a confusing name for dynamic. They call it salary compression, referring to the way the pay gap narrows between those with more experience at a company and those with less experience. Compression is bad because, generally speaking, veterans should get paid more than recruits, given that they’ve already proven themselves and are accelerating the way their companies operate. When traditional salary ranges change—when newcomers earn higher salaries than long-time employees in similar roles—experts call it a payroll reversal.

Atlanta Fed marks salaries of those who remain in their jobs and those of those who replace them, and this makes it possible to watch salary inversion in action over the past two decades. During recessions, those who stay at work are better paid than those who change jobs, reflecting the fact that changing jobs during bad times is often involuntary – people are laid off and have no choice but to take lower-paying roles. In expansions, it’s the opposite – job modifiers go to the top. This is it now. In April, wages for those who changed jobs rose 5.6% year-on-year, compared to 4.2% for those who remained in employment. This 1.4 percentage point difference is the biggest since the dot-com bubble in 2001. In fact, it’s so big that switching employers makes all the difference in whether your salary is keeping up with inflation. In the first quarter of this year, the Fed’s preferred price indicator increased by 5.2%.

If you’re one of those job survivors, what you probably want to know is how much money you have left on the table. LaborIQ tracks the average salary for nearly 20,000 job titles and then calculates what companies should offer for new hires in today’s job market, adjusted for each specific job and location. Nationally, the difference between these two numbers is 7%. However, this gap varies widely depending on the job. Denton, an analyst at LaborIQ, told me that inequality is particularly large in technology and finance, where competition for talent is particularly fierce.

I asked Denton and his colleagues to take the example of a job title in technology with particularly large gaps. They told me the national median salary for IT managers is $116,243. However, LaborIQ calculates that companies should offer $139,313 for new IT managers, with a 20% gap. The difference is 14% for systems analyst programmers, 13% for database developers, and 11% for information security engineers and data science managers. Vacancies also vary widely in major cities. For IT managers, the difference is 10% in Salt Lake City, 20% in San Francisco, and 22% in Austin, Texas.

Employers may hope to keep their employees in the dark about salary discrepancies, but the secret has already been revealed. Employees talk to each other and scrub sites Glassdoor,,, and Blind all offer salary information. And as I wrote about last year, governments are increasingly requiring employers to list pay ranges in their job postings. “When these roles are sent along with what the salaries are, people are like, ‘Wait, I have that job,'” Denton said.

This information is for any problem. Long-term employees are dissatisfied. Morale dropped. And attrition skyrocketed: A record 4.5 million Americans left their jobs in March. Now, as rising prices force people to seek the salary increase that comes with a new position, inflation is turning more workers left into job changers.

Employers know they have a problem. soon questionnaire In a study conducted by staffing firm Robert Half, 56% of senior executives agreed that there are pay gaps between new and existing staff. About two-thirds of them said they plan to conduct regular pay audits and adjust salaries to close gaps. But even the hardest working employers usually only conduct an audit once a year. Denton told me that salaries are rising so fast in this economy that employers will likely need to review and adjust the salaries of current employees quarterly. If they don’t, they risk losing even more skills.

Payscale, which provides compensation data to employers, recently audited how much its 600 employees could earn in the current job market. “We were concerned about our current employees who are with us regardless of this tenure,” said Lexi Clarke, head of people. “We want to make sure that the offers we make externally in the market and our current employees are matched.” Clarke said that as a result of the audit, employees received salary increases of 3% to 20%, which was “significantly” larger than in previous years. Salary adjustments helped reduce revenue at growing Payscale. Going forward, the company hopes to quickly identify and resolve any inequities before they get out of hand.

Hikes, stock rewards, fancy outings

Microsoft is another company that has made big strides in raising wages. Last week, CEO Satya Nadella told the employees He said Microsoft will increase the salaries of high performers and give more stock grants from September. The moves were aimed at stopping employees from jumping ship—particularly to Amazon, a competitor that has more than doubled its maximum base salary to $350,000 recently.

Microsoft has deep pockets to deliver dramatic increases in compensation – nearly doubling its current payroll budget and quadrupling its stock rewards. But other companies were forced to get creative. “We’ve seen that organizations are really putting their thinking limits and what they can do to prevent employees from jumping out where they can potentially get more compensation,” said Dawn Fay, senior district chair at Robert Half. Some offer one-time bonuses. Others hand out rewards for high performance, including flashy outings, tuition reimbursement, and gym memberships. “All these kinds of things are being looked at more than they are now,” said Fay.

Salary differences according to metropolitan cities

Click on the menu and then hover over the map to see the pay gaps for various jobs:

So what does all this mean for those at work who don’t want to miss the pay spree? Changing jobs is the most obvious option. But job search is a pain and full of uncertainties. Employees may not need to look elsewhere to get the pay rise they want. The first step is to determine how poor their salaries are compared to the job market, and then use that information for a raise interview. In the Great Resignation, employers have never been more desperate to ensure their employees stay – which means they’ve been more open about salaries than they have been in the past.

As for job changers who use the big resignation to get big pay raises, being overpaid comes with its own risks. Currently, the national layoff rate is near record levels. But if a


The hits — and the recent drop in stock prices may indicate that one is coming — employees with large salaries will be most vulnerable to layoffs. For those who stay at work, it can be a bit of a consolation to know that they have a little more job security.

Ideally, though, no matter how hot the job market gets, the gaps between those who stay at work and those who change will never open. If the market is paying more for certain positions, companies should offer the same pay to their current employees. Years ago,


He decided that he shouldn’t wait for his good employees to be hunted down by competitors before offering a raise – he should proactively pay his employees what they can earn elsewhere. The best employees were rewarded for their dedication, not punished for sticking around.

Now, spurred by the Great Resignation, an increasing number of companies are being forced to take the same approach, with frequent wage audits to ensure current workers’ wages keep pace with the market. It’s a smart move – it’s sure to boost morale, improve performance, and reduce turnover. After all, if a company automatically pays its valued employees what the market demands, talented employees have no financial incentive to go looking for a new job. They know the fee is already greener on their side of the fence.

Aki Ito He is a senior reporter at Insider.

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