Staying in a job may be what’s preventing employees from seeing real wage growth.
At a time when low unemployment and a tight job market suggests salaries should be rising faster than what’s being seen, The Wall Street Journal reports economists believe that’s because of low job-switching rates.
Workers that switch jobs in the U.S. see an average of 4% wage growth, and yet they have become more cautious about switching jobs in the face of global economic uncertainty.
Even as the labor market continues to tighten, economists say wage growth and inflation could lag behind.
Between 2000 and 2007, the average annual wage change in the U.S. was 1.7%. From 2010 to 2018, it dropped to 0.8%, more than half.
According to the report, the average U.S. worker earns 40% of their lifetime wage growth from switching jobs, versus other factors like experience and skills.
The new theory is being offered up as an explanation for why inflation hasn’t yet picked up.
“The biggest reason for wage rises is competition, either actual turnover or the threat of turnover,” labor economist Chris Pissarides told The Journal. “If we’re observing declining labor turnover, that should have an impact on productivity and wage increases.”
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