Why Employees Jump Between Jobs
March 29, 2018
By Graham Templeton
New research breaking down employee turnover rates by industry gives insight into the reasons behind the increasing job-switching in today's economy.
With the exception of a few extremely high-status types of jobs, workers have always been generally grateful if their career gives them a sense of security for the long term — and yet, job switching today is rampant. This seeming contradiction has confounded HR departments for years, as they struggle to understand why the factors that have traditionally determined job mobility seem ineffective at controlling this accelerating trend.
The ADP Workforce Vitality Report (WVR) for the fourth quarter of 2017 sheds light on this issue, breaking down employee turnover rates by industry and digging into some of the causes. The report shows that while full-time workers who kept their jobs saw their wages grow by 4.3 percent, those who switched jobs saw their wages grow by just 3.3 percent. Job holders made an average of $10 more per hour than job switchers, as well, and both trends in favor of job holding have held for several years.
Yet despite the obvious utility of keeping a job in the modern economy, the employee job switching rate has been steadily increasing over the last several years. The figure rose from 24.7 percent in the fourth quarter of 2015 to 26.2 percent in the fourth quarter of 2016 to 27.7 percent in the fourth quarter of 2017.
Employee Job Switching by Industry
The WVR also burrows beneath these large-scale numbers, however, revealing a very different picture on a per-industry basis. The leisure and hospitality industry saw by far the greatest turnover, with an enormous 50.1 percent, but that makes sense — this quarter's report also shows that leisure and hospitality has performed among the best for employees who stayed with their jobs, generating a 4.9 percent wage increase overall. But workers who moved from this industry to another saw a whopping 9.4 percent increase in their wages.
The industries with a low job-switching rate (workers moving from the industry) like finance (with a switching rate of 14.9 percent) see workers who switch away from the industry making only a 0.9 percent increase, whereas workers who move to finance get a substantial increase of 6.1 percent. So, it not surprising that finance has a low switching rate.
Why Would Workers Choose to Make Less?
Millennials are now both the largest cohort of workers and the most successful, overall, and their attitudes toward work are very different from those of baby boomer or Generation X employees.
The other issue is that with advanced online platforms and automation technologies, job switching is now easier than ever — and workers often don't have an accurate understanding of the overall benefits of two competing employment contracts. Recruiters have a vested interest in making new opportunities seem enticing, and they can be very good at it, meaning that a difference in wage numbers might not be apparent, or appear outweighed by another incentive. As the cultural and technological barriers to job switching continue to erode, the association between pure wage numbers and job loyalty will likely continue to decline as well.
What to Do About the Changing Labor Market
Modern workers are increasingly interested in unconventional benefits and alternative forms of remuneration, meaning that the millennial tendency toward job mobility is accented by a further willingness to switch jobs for reasons other than pay. Don't assume that just because a job-switching worker's wage has deflated relative to a job-holder's, that their situation is thus worse overall. It's important to understand what job switchers are looking for so you can entice workers to switch in the direction of your business while also enticing current employees to stay.
This quarter's WVR confirms that trends in worker mobility are holding strong and show no signs of abating. It also shows that while workers do follow financial success, there are still plenty of ways an industry or single business can intentionally lower its turnover rate while increasing its attractiveness to job switchers from other organizations. There's no way to completely stop the outflow of workers, but a well-run business can operate with a net labor gain, over time.
About the Report: The ADP Workforce Vitality Index is a comprehensive, quarterly measure of U.S. workforce dynamics that looks at key labor market indicators, such as employment growth, job turnover, wage growth and hours worked. This report yields deeper insights into workforce dynamics and trends than previously available.
For media inquiries about the ADP Workforce Vitality Report, please call 201-400-4583 or email Allyce Hackmann.