In­tent on getting a big raise? You may have to quit your job

The Palm Beach Post - - YOUR MONEY - By Christo­pher Rugaber

WASH­ING­TON — De­spite one of the best job mar­kets in decades, work­ers across the U.S. economy are strug­gling with a com­mon frus­tra­tion: What does it take to fi­nally get a de­cent raise?

It turns out you might have to quit your job.

Amer­i­cans who leave their em­ploy­ers to take a new job are en­joy­ing pay raises that are onethird larger than raises for work­ers who stay put — a gap that has reached the widest point since the Great Recession.

At the same time, re­tail and restau­rant work­ers are re­ceiv­ing more gen­er­ous raises than man­u­fac­tur­ing work­ers are.

And Amer­ica’s CEOs are getting some of the big­gest pay gains of all.

At a time when the av­er­age an­nual wage in­crease for U.S. work­ers as a whole re­mains sur­pris­ingly mod­est given the ro­bust job mar­ket, those groups of work­ers are do­ing bet­ter than av­er­age.

Oth­ers aren’t far­ing as well. Pay raises for peo­ple who have stayed in the same job for the past year, for ex­am­ple, re­main rel­a­tively stag­nant. That trend has con­founded some economists. Many had ex­pected that com­pa­nies would have to pay more to re­tain em­ploy­ees at a time when work­ers are harder to find and the un­em­ploy­ment rate, at 3.9 per­cent, is near a 50-year low.

Na­tion­ally, av­er­age hourly pay rose 2.7 per­cent in July from a year ear­lier, be­fore ad­just­ing for in­fla­tion. That is mod­est by his­tor­i­cal stan­dards. The last time un­em­ploy­ment was this low, in the late 1990s, pay raises for Amer­i­cans as a whole av­er­aged roughly 4 per­cent.

And once you fac­tor in in­fla­tion, av­er­age hourly pay has ac­tu­ally de­clined slightly over the past 12 months.

Here are some ways in which av­er­age pay growth varies depend­ing

on the cat­e­gory of worker:

Find a new job, get a big raise

It would seem fun­da­men­tal: If you want a de­cent raise, find a new job. But it doesn’t al­ways work that way. For the first six years af­ter the 2008-2009 Great Recession, peo­ple who switched jobs re­ceived raises that were scarcely bet­ter than those for work­ers who stayed in their jobs.

But since then, the switch­ers have com­manded steadily bet­ter raises than the stay­ers. In July, wages for job switch­ers grew 3.8 per­cent from a year ear­lier, com­pared with 2.9 per­cent for those who stayed be­hind, ac­cord­ing to data from the Fed­eral Re­serve Bank of At­lanta. In Fe­bru­ary and March this year, that gap reached 1.7 per­cent­age points, the widest dis­par­ity since Au­gust 2001.

Yet the fig­ures also il­lus­trate how pay is still lag­ging com­pared with pre­vi­ous pe­ri­ods of brisk job growth.

Even the pay gains for job-switch­ers are rel­a­tively mod­est com­pared with pe­ri­ods in the past. Be­fore the recession, job switch­ers re­ceived an­nual raises of nearly 5 per­cent. In the late 1990s, they topped 6 per­cent. Even ad­just­ing for in­fla­tion, job switch­ers fared bet­ter in the late 1990s than they do now.

And for roughly three years now, av­er­age raises for work­ers who have stayed in their jobs have re­mained stuck be­low 3 per­cent.

“It’s in­ter­est­ing that in a la­bor mar­ket that is this tight, em­ploy­ers do not seem to be rais­ing wages for work­ers who are stay­ing,” said Martha Gim­bel, an econ­o­mist at the job search web­site In­deed. “That could im­ply they are not wor­ried about work­ers be­ing poached, which is sur­pris­ing.”

Gim­bel sug­gested that at least some work­ers might be stay­ing in their jobs be­cause of a grow­ing use of “non-com­pete” agree­ments, which re­strict work­ers from jump­ing to com­peti­tors. Such agree­ments have been used in­creas­ingly even in low-wage jobs such as fast-food work.

In ad­di­tion, many job-switch­ers may have mas­tered high-tech and other skill sets that al­low them to com­mand higher wages as com­pe­ti­tion for such work­ers heats up.

Lower-paid work­ers re­ceive notable gains

For six years af­ter the recession, the low­est-paid work­ers re­ceived the thinnest wage gains — and in sev­eral years their pay de­clined. Yet since 2015, they have clawed back some of those losses.

For the low­est-paid one-fifth of the work­force, wages rose 2.3 per­cent in 2017, ad­justed for in­fla­tion, ac­cord­ing to the Eco­nomic Pol­icy In­sti­tute, a lib­eral think tank. That topped the av­er­age for mid­dle-in­come work­ers, whose pay gains inched up just 0.2 per­cent.

It’s also ahead of the rich­est one-tenth of work­ers, whose pay rose 1.9 per­cent. Low-paid work­ers also saw a huge gain in 2016 that ran far ahead of mid­dle-in­come and wealthy em­ploy­ees.

Solid gains for whites and Lati­nos

White Amer­i­cans, on av­er­age, earn much more than African-Amer­i­cans or Lati­nos. The gap be­tween whites and Lati­nos has nar­rowed very slightly in the past three years as wage gains have be­gun to pick up across the economy.

For whites and Lati­nos pay rose 0.9 per­cent ad­justed for in­fla­tion last year; for African Amer­i­cans, it fell 0.5 per­cent. Lati­nos re­ceived the big­gest raises in 2016; whites earned the most in 2015.

CEOs still rak­ing it in

Even as poorer work­ers have fared bet­ter, CEOs, not sur­pris­ingly, have done best.

In 2017, the chief ex­ec­u­tives of the 350 largest pub­licly traded U.S. com­pa­nies re­ported, on av­er­age, an in­crease in com­pen­sa­tion of nearly 18 per­cent, ac­cord­ing to a re­port by the Eco­nomic Pol­icy In­sti­tute. That com­pares with a puny raise of just 0.3 per­cent for all other work­ers in the same in­dus­tries. Both fig­ures are ad­justed for in­fla­tion.

Larry Mishel, se­nior econ­o­mist at EPI, said CEO pay jumped largely be­cause it is closely tied to the health of the stock mar­ket. The S&P 500 stock in­dex soared 22 per­cent in 2017. Most CEO pay comes in the form of stock op­tions, which are much more lu­cra­tive in a rising mar­ket.

CON­TRIB­UTED

Amer­i­cans who quit to take new jobs are en­joy­ing pay raises that are one-third larger than raises for work­ers who stay put, a gap that has reached the widest point since the Great Recession. At the same time, re­tail and restau­rant work­ers are re­ceiv­ing more gen­er­ous raises than man­u­fac­tur­ing work­ers.

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