In today’s intense labor market, there are various kinds of workers: the long-term unemployed, workers who have left the labor force, individuals that want more from the company they work for and those who are extending their years on the job because they were financially wiped out during the Great Recession.
What about those who are too loyal to their job? This concept was recently explained by Forbes contributor Cameron Keng, who opined that workers who stay with their company for more than two years get paid 50 percent less over a lifetime – he argues the 50 percent figure is a conservative estimate.
Keng further noted that the average pay raise will be three percent this year – underperformers will get on average a 1.3 percent jump in pay, while the best of the best will receive roughly 4.5 percent. However, the inflation rate is more than two percent so the increase in pay barely covers inflation costs.
People who quit their current job and move on have a better chance of seeing their salaries increase between 10 and 20 percent.
“I would often see resumes that only had a few years at each company. I found that the people who had switched companies usually commanded a higher salary,” said Bethany Devine, a Senior Hiring Manager, in an interview with the business news publication.
“The problem with staying at a company forever is you start with a base salary and usually annual raises are based on a percentage of your current salary. There is often a limit to how high your manager can bump you up since it’s based on a percentage of your current salary. However, if you move to another company, you start fresh and can usually command a higher base salary to hire you.”
Devine explained that some companies maintain a limit on annual promotions, while workers will be inserted into a long line of employees who should have been given a promotion a long time ago. The same thing can be applied to raises because during the recession businesses had reduced, limited or eliminated pay raises altogether.
Also, some companies out there are not frightened to compete and pay for top talent.
Why are workers so loyal to one company? A new Canadian study might shed some light on the matter. Economist Benjamin Tal believes that fear is playing an important part for the reason why half of the Canadian labor market is sticking with the one job as opposed to working in five to seven careers in their lifetime.
Keng wrote that workers would be in a lot better situations if they took their careers into their own hands and have the courage to move on. He added that workers must improve their personal profitability, but the data suggests the American labor force isn’t necessarily intent on doing that.
For instance, a new survey released Tuesday from Bankrate.com found that more than one-quarter of Americas have absolutely zero emergency savings. Over two-thirds (67 percent) had saved less than the recommended six months worth of expenses and half have saved less than three months worth of expensive.
“Americans continue to show a stunning lack of process in accumulating sufficient emergency savings,” said Greg McBride, Bankrate.com’s chief financial analyst, in a statement. “Even among the highest-income households—those with annual income of $75,000 or above—fewer than half [46 percent] currently have a six-month savings cushion.”
Household debt levels are also providing a significant hindrance to any genuine wealth accumulation: the average credit card debt is $15,191, while the average student loan debt is $33,607.
Too much consumption and too little savings could eventually damage the financial health of millions of American households in the near future, particularly when interest rates begin to rise substantially.
