New DEED Research Reveals Most Minnesota Workers who Recently Switched Employers Saw Real Wage Gains
Earnings incentives could increase number of workers changing employers; Data also shows more people leaving employment than seen pre-pandemic.
September 23, 2022
St. Paul – New research from the Labor Market Information (LMI) Office at the Minnesota Department of Employment and Economic Development (DEED) takes a closer look at job mobility patterns of workers in the state, with a focus on wage impacts. This research helps economists, employers and others understand worker mobility in the context of inflation that is outpacing average wage growth and high rates of workers choosing to leave or change employers during this tight labor market.
Senior Labor Market Research Analyst Alessia Leibert utilized Unemployment Insurance Wage Records and other sources to conduct the research for her article Job Mobility in the Post-COVID Recession Labor Market, which is featured in this quarter's Minnesota Economic Trends. Leibert has been asked by leaders at the U.S. Department of Labor and U.S. Bureau of Labor Statistics to present on her findings, which could help economists better understand today's unprecedented labor market conditions. The research could also help employers combat high turnover that lowers productivity and increases costs.
Coming out of the COVID-19 recession, the U.S. labor market is facing two major challenges. First, price inflation is outpacing wage growth, hurting workers by eroding their real earnings. Second, historically high voluntary quit rates are hurting firms while they are already struggling to fill job openings. Leibert's article examines job mobility patterns of Minnesota workers before and after the COVID-19 recession, showing not only a significant increase in those leaving the labor force altogether but also variability in earnings growth based on workers' age and industry. By adjusting wages for inflation, this study examines how job mobility interacts with inflation across different groups of workers and industries.
"One of the questions I wanted to examine was which industries are most at risk of hemorrhaging workers in future months," said Leibert. "The answer is complicated because negative impacts on real wages vary by industry and worker tendency toward mobility varies by age group and other factors."
"Research like that conducted by Alessia Leibert is one of the many things that set our Labor Market Information office apart from its counterparts across the nation," said DEED Commissioner Steve Grove. "Identifying and seeking to understand labor market trends can help Minnesota employers and job seekers adapt to current conditions and plan for the future."
The boost in wages from switching employer compared to remaining with the same employer has increased in the post-COVID period, increasing the economic incentive for workers to switch. Inflation-adjusted median wage growth for workers who stayed with the same employer shrunk by -1% over the year, indicating that they did not obtain enough pay increase to offset inflation. In contrast, the typical worker who found a new employer posted a wage gain of 6.1% after adjusting for inflation. Workers with the lowest initial wages switched employers far more often than other workers and had the highest relative annual earnings growth from switching and young workers on average experienced a larger earnings increase from switching than older workers.
It is also worth noting that if this research had measured job mobility as any job-to-job change in-between quarters instead of measuring it at two points in time we would find that the post-COVID cohort experienced greater churn than the pre-COVID cohort. However, this research was focused on job mobility, not churn. Comparing mobility pre-COVID recession with mobility post-COVID recession by industry reveals remarkable similarities, suggesting that the structural mechanisms that fuel job mobility and wage growth in each industry have not changed significantly. What appears to have changed is the degree to which an industry suffered long-term damage from the COVID-19 recession and how different employers are changing wage offers to respond to labor shortages. The heightened competition for workers who have learned to take advantage of job shopping benefits employers who are able to respond quickly either by raising wages across the firm or by investing in other employee retention strategies.
See Leibert's entire article, along with other articles in this quarterly edition of Minnesota Economic Trends. Additional articles will be posted soon.
DEED is the state’s principal economic development agency, promoting business recruitment, expansion and retention, workforce development, international trade and community development. For more details about the agency and its services, visit the DEED website, the JoinUsMn.com website, or follow us on Twitter.