1 Reason Why You Aren't Getting Paid More

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:

All,

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.

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  • Report this Comment On April 28, 2014, at 12:45 AM, RussellL wrote:

    "The court case against these companies is scheduled to go to trial on May 27."

    I thought they settled?

    April 24 2014

    SAN FRANCISCO (Reuters) - Four major tech companies including Apple and Google have agreed to pay a total of $324 million to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley, sources familiar with the deal said, just weeks before a high profile trial had been scheduled to begin.

    http://www.reuters.com/article/2014/04/25/us-apple-google-la...

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