In today’s economic climate, landing a well-paying job is a pretty heady achievement. Not only have you beaten out countless others hungry competitors, but you’ve beaten the odds of falling victim to tough employment times. As thanks for finally getting the job, you want to show your appreciation through loyalty by staying with the company and growing through it. However, that may not be your best bet, as Forbes recently wrote an article stating that staying at your current job for longer than two years can actually work out to earning far less total over your lifetime. But before you hand in your resignation letter, keep reading to find out just what this means for you.
Underpaid and Not Getting Good Enough Results
It’s no secret that workers everywhere have had to face some sort of reduction in pay because of the recession, whether that means starting afresh at a lower-paying job, taking a pay cut to still retain your job, or working fewer hours so the company can afford you. That’s not something we’re disputing, as it’s been seen in just about every type of job and industry.
But what is of issue is employees aren’t getting the kinds of raises and promotions they need to a) be motivated to stay with a company for any length of time, and b) keep competitive with inflation’s rising costs of almost everything. The average pay increase used to be 5% a year, which would have kept an employee healthily ahead of the rate of inflation. That rate has since dropped dramatically to about 3% this year which, when compared with an inflation rate of 2.1%, amounts to a raise of less than 1%. You’re hardly getting ahead at all when your gross rate of pay is increasing less than a full percentage point.
However, that 3% is only an average figure, as the top bunch in the group can expect to see a raise of about 4.5%, while the poorer-performing employees can expect to see something in the 1.3% range. Neither is as sustainable as it used to be, which is why staying at the job that’s not going to help you prosper could end up costing you over the long-term.
Job-Hopping: Not as Bad as it Used to Be
So, you’ve been at your current job for just about two years, or maybe more, and in reading this, you’ve realized your employer is one of the many who can’t, or won’t, afford to give you the raises you need to comfortably settle down in life. But your entire life, all you’ve heard is job-hopping looks really bad on your resume and makes you a lot less hirable to future employers.
In terms of this quandary, it’s a question of risk versus reward. Of course, there will always be employers who won’t take a second look at your application if you’ve had three to five jobs in the last 10 years, but that doesn’t necessarily mean all employers will. And you have to ask yourself if looking good on paper is worth potentially missing out on higher pay, especially if you see your peers advancing financially much more rapidly than yourself.
One possible way around this is to alternate the two-year schedule like this: stay at one job for four years instead of two, going through with less-than-desirable pay raises, and then stay at the next job for only two years. This way, you have the benefit of both looking good on your resume and not having to settle for being paid less than you could.
How to Make Job-Hopping Work in Your Favor
The term “job-hopping” has a negative connotation to it, but you can really make it work for you if you leverage it the right way. Your goal should be to always move forward at a higher rate of pay than you currently are. Let’s say you’re making $40,000 right now and the standard is a 4% pay raise. Here’s how your salary would like using our proposed alternate schedule:
Year 1: $40,000
Year 2: $41,600
Year 3: $43,264
Going up almost $5,000 within four years isn’t a huge amount, especially when comparing it to how much money you’re bringing in for the company. But what you’re (temporarily) sacrificing in pay, you’re making up in future desirability. After those two years are up, you now have far more experience and leverage than your two-year competitor, and can translate that into a 10% or more increase at your next job. To be conservative, let’s say your new job will only pay you 10% more than what you made in Year 4 at the last one, and still remain with the same 4% raise:
Year 1: $49,494
Year 2: $51,473.76
Now, in just a matter of six years, you’ve increased your gross pay by $11,500, or roughly 25% of what you first started with, as well as your desirability as a job candidate. If you had job-hopped like your competitors, there’s a chance you might have made more money, but any economist will tell you the smartest way to build a solid financial foundation is to go at it methodically, rather than rapid, large increases. Finally, the after-effects of this recession won’t last forever as the economy continues to stabilize, and there’s a good possibility you won’t have to job-hop every two years as outlined in Forbes. But it’s a decision you should think carefully about, and make using this maxim: never quit your current job until you have another one lined up.