People who change jobs receive a wage premium of between 2.3 per cent and 2.4 per cent in the three months immediately after they move, according to new research published by the Central Bank.
Job switching “appears to be an important mechanism for wage growth”, especially during times when labour markets are tight, the research technical paper by Central Bank economist Enda Keenan found.
The paper uses newly available gross pay data from the Labour Force Survey (LFS) linked to administrative data on individual earnings to analyse whether switching jobs comes with a wage premium.
When demographic factors such as age, education and sector are taken into account, it estimates that switchers earn a premium over people who remain in place of between 2.3 per cent and 2.4 per cent.
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This points to greater earning power for switchers compared to non-switchers. The individual gain to workers “may be much larger,” the report said.
This raw wage premium for job switchers – which excludes other factors – was estimated to come in at an average of 5.9 per cent between 2019 and 2023, the paper found, though that declined over the period as the labour market softened.
Switchers received an average 7.5 per cent wage increase in a three months following a job change while people who stayed in their roles earned 1.6 per cent more per quarter.
This meant that in the quarter directly following a job-to-job transition, switchers earned €58 more than their previous weekly wage. Male workers who switched jobs earned €62 more per week on average relative to their previous wages, while women saw their average weekly wages rise €53 after they switched jobs.
Analysis by age shows that younger workers experience the largest changes for both switchers and stayers.
Younger workers, people employed in lower-paying sectors and individuals with shorter job tenures are more likely to switch jobs, often seeking to maximise lifetime earnings potential or find better job matches.
Younger people and those with higher educational attainment may be more likely to switch to pursue better opportunities and have greater access to varied opportunities that increase their marketability.
The figures are mostly consistent with findings in other European countries such as France and Italy, the research suggests, although the estimated wage premium for switching jobs in the Irish labour market is “notably lower” than it has been found to be in the US.
“Policymakers may need to consider the factors influencing labour mobility and wage dynamics, especially in light of evolving employment patterns such as remote and hybrid work,” Mr Keenan wrote.
Further research could explore the impact of these changing work arrangements on job switching behaviour and wage premiums, he added, while future studies could also offer deeper insights into wage inequality, gender wage gaps and the long-term career progression of workers.
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