1 Reason Why You Aren't Getting Paid More

If you don't feel like you're getting paid what you're worth, this could be the reason.

Apr 27, 2014 at 11:00AM

Since the recession, you may have experienced only a meager increase in your paycheck, a wage freeze, or, worse, a pay cut. Therefore you may blame your employer for your stagnating income. However, you should probably blame other employers for not hiring you away from your current job. Why?

Wage increases come for the most part from moving from job to job, and there has been significantly less of that since the recession.

Job-to-job employment
Those who are unemployed bear a stigma that makes it harder for them to find work. But even among those who have jobs, finding a different one and skipping unemployment altogether has become rarer. Here, the percentage of the population that moves from job to job has fallen from 2% in 2000 to 0.8% in late 2013:


Source: Federal Reserve.

And there's been little movement upward since 2008. But where does employer-to-employer movement meet wage growth?

Wage pops from job hops
One paper from the National Bureau of Economic Research details the relationship between employee turnover and wage increases. It notes that over an employee's working life (specifically males in this paper), wages will double and there will be 10 job changes. However, about two-thirds of these job changes and two-thirds of the wage growth will occur within the first 10 years.

The paper concludes, "The key element leading to the eventual durability of jobs is the wage, growth of which is largely an outcome of the search process itself."

As the turnover between jobs remains low, so does your paycheck.

In practice
This is one reason why Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) attempted to collude with five other tech companies in an agreement not to hire employees from each other. Among the documents that PandoDaily highlights is an email sent out by Apple's human resources department stating:


Please add Google to your "hands-off" list. We recently agreed not to recruit from one another so if you hear of any recruiting they are doing against us, please be sure to let me know.

Please also be sure to honor our side of the deal.

This occurred after Steve Jobs himself emailed a threat to Google's Sergey Brin that if they hired a single employee, "that means war." The average base salary for an engineer at Google in 2013 was about $125,000 versus Apple's $118,000, but with recruiting among the companies restricted, these could be artificially depressed. The court case against these companies is scheduled to go to trial on May 27.

In the future
With job-to-job changes occurring at a lower rate than normal, there could be a pent-up number of workers waiting to jump ship but having nowhere to go. And the younger workforce could be missing the wage growth that earlier generations realized with multiple job changes early in their careers.

You might want to seek a new job to test the salary offerings outside your work -- but that's only if you can find such an opportunity.

Take advantage of this little-known tax "loophole"
If your wages aren't increasing, you could try to lower your expenses, like taxes. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Dan Newman owns shares of Apple. The Motley Fool recommends Apple and Google-Class C Shares. The Motley Fool owns shares of Apple and Google-Class C Shares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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