One of the main drivers of the “Great Resignation” that saw more than 50 million Americans quit their job in 2022 was the fact that labor was in short supply, resulting in higher wages being offered by employers who struggled to fill open positions. Switching jobs quite simply paid off, as workers were able to land significantly higher salaries by putting themselves back on the market instead of sticking with their old employer.
According to ADP Pay Insights, which is based on payroll transaction data from almost 10 million employees in the United States, the median year-over-year increase in annual pay for job switchers was above 15 percent for the most part of 2022. For people staying in their current jobs, the average pay increase was significantly lower, between 7 and 8 percent, or half of what job switchers were getting.
Over the past months, however, the labor market has shown signs of cooling, with job openings coming down from historically high levels and fewer positions remaining unfilled across industries. As the imbalance between labor supply and demand gradually eases, wage growth naturally slows down. According to ADP, that slowdown has been much more pronounced for job changers, though, resulting in a smaller gap between pay increases of job switchers and job stayers. While there was an 8.8 percentage point chasm between the two in April 2022, the difference in median pay increases has narrowed to 2.8 percentage points by May 2024.
As a result, the number of Americans quitting their jobs has come down notably as well, putting an end to the “Great Resignation”, one of the more surprising post-pandemic labor market trends.
