Is now the right time for Millennial and Gen Z workers to switch jobs?

Wage increases for those who switch jobs are at their highest point in 20 years, and job-hopping Millennial and Gen Z workers are taking advantage of this market while reaping the economic benefits. 

Thanks to a combination of pandemic-era job vacancies and employers sweetening offers with inflation-adjusted wages and premiums, it’s shaping up to be an opportune time for young workers eyeing greener pastures.  

In April 2022 Gen Z job transitions were nearly 30 percent higher than the total reported a year earlier, compared with a 9.6 percent increase among Millennials. 

A Bank of America Institute report published in May found, “it has paid off to move jobs,” especially for younger generations, who appear to have done “exceptionally well” by doing so. Researchers found that between May of last year and April of this year, younger generations saw the largest pay raises. 

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“Generation Z and Millennials received pay increases of 19.9 percent and 11.3 percent, respectively, over this period,” researchers wrote, noting Millennial increases were significantly higher than those recorded for Gen X. 

The annual pay raise associated with job switches was around 17.6 percent, according to Bank of America data. For younger workers, that raise was even higher – Gen Z job changers secured an average 29.7 percent rise and Millennials received a 20 percent rise. 

“In other words, and perhaps unsurprisingly, it has paid off to move jobs,” researchers wrote. 

Figures also suggested individuals who earned less than $50,000 per year were more likely to switch jobs. 

In July, inflation was measured at 8.5 percent. For those whose wages have not grown to reflect the shift, everyday costs of living have cut deeper into salaries.  

Pew data show the majority of individuals who did switch jobs between April 2021 and March 2022 saw an increase in inflation-adjusted earnings. 

In addition, new data from the Federal Reserve Bank of Atlanta show workers who recently switched jobs netted an annual raise of around 8.5 percent in July compared with 7.9 percent in June. In comparison, those who remained at the same job saw a median annual wage increase of just 5.9 percent in July. 

Further research from ADP found median change in annual pay rose by 7.6 percent for job stayers, but by 16.1 percent for job switchers. 

Both Millennials and Gen Z have a reputation as job hoppers. According to a recent report from Pew Research Center, “young adults are more likely to change jobs in any given month.” The report showed those between the ages 16 to 24 switched employers at a monthly rate of 4.1 percent in 2019 and 4.4 percent in 2022, while those ages 55 to 64 moved at a rate of just 1.9 percent in 2022.

Gen Z and Millennials face a myriad of economic challenges that make the potential of a higher salary enticing and could in part explain their trend of job switching. High student debt and rent prices, along with stagnant wages at their current jobs, are just a few of these challenges.

Younger individuals and those with lower incomes are also more likely to take on independent freelance work out of financial necessity or because it offers increased flexibility, underscoring the shortcomings some see in more traditional roles. 

Eagerness to switch jobs among these younger cohorts could also reflect concerns outside of wages. Many members of Gen Z, the most recent college graduates, may have higher aspirations than their current positions which could be entry-level jobs. A lack of children, houses, or other major financial responsibilities enables job flexibility at this early career stage. 

Tech-savvy and skilled Millennials who have been in the workforce longer can also be attractive candidates for recruiters. 

Young workers tend to seek out jobs that align with their personal values, as a survey from Deloitte shows around 37 percent of Millennial and Gen Z workers have turned down a job or assignment based on their personal ethics. Aligning both personal and company values could result in younger professionals being more selective when deciding which opportunities to pursue. 

Benefits like flexible work hours, vacation time, and retirement contributions can also sway workers from company to company. 

Regardless of the reason, changing jobs does come with a set of risks. Should a recession occur, those newest to the company might also be the first to get let go. And switching a job in and of itself does not guarantee a wage increase, while employees could run into similar challenges present at their old job, or not enjoy the new position. 

Filling jobs cut during the pandemic may also slow in the coming months, leaving less opportunities available for those wishing to switch. 

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” explained Nela Richardson, chief economist at ADP in a statement.

“We could be at an inflection point, from super-charged job gains to something more normal.”

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