Economy 5 min read By Bethany Hadley
Job-switching pay premium falls to 8% as Gen Z bears the brunt
The pay boost from changing jobs has fallen sharply since 2022, with younger workers facing the toughest labour market in years as employers hold back on hiring.
The financial reward for changing jobs has fallen sharply since the post-pandemic hiring boom, with workers who switch employers now securing far smaller pay rises than they did four years ago. According to analysis by the Bank of America Institute, the typical job switcher saw after-tax pay grow by just 8% in the first quarter of 2026, compared with nearly 18% in 2022. Workers who stayed with their employer received a 5% increase, leaving the smallest gap between the two groups in seven years.
The shrinking premium reflects a labour market that economists describe as «low-hire, low-fire», in which employers hold the upper hand and are reluctant to add headcount while the economic outlook remains uncertain. Quits have fallen to near their lowest level since 2020, with only 1.9% of nonfarm employees leaving their jobs in August, according to the Bureau of Labor Statistics. Companies that are not competing fiercely for staff feel less pressure to pay a premium to lure new recruits.
For younger workers, the consequences are particularly acute. The unemployment rate for recent college graduates aged 22 to 27 stood at about 5.6% in the second quarter, according to the Federal Reserve Bank of New York, well above the 4.2% rate for all workers. Employers with limited hiring budgets are prioritising experience over taking a chance on less-trained candidates, and the average age of a new hire climbed to 42 in 2025, up from 40.5 in 2022, according to Revelio Labs.
The shift marks a stark reversal from the Great Resignation of 2021 and 2022, when tens of millions of American workers left their jobs in search of better pay and conditions. That period gave job-switchers unusual leverage, but the balance has since tilted back towards employers. Workers who fear they cannot make a move at all are now «job-hugging» — staying in roles they would previously have left, often growing resentful of employers they feel stuck with.
Gen Z has been hit hardest by the change. More than one in four Gen Z workers changed companies in the first quarter, more than ten percentage points higher than millennials and more than triple the rate of baby boomers. Switching still pays for them — Gen Z job switchers saw more than four times the wage growth of peers who stayed put — but their pay increases have fallen by 20 percentage points since early 2022.
Despite the difficult conditions, younger professionals remain eager to move. Around 55% of Gen Z professionals plan to look for a new job before the end of the year, according to recruitment firm Robert Half, up from 32% a year earlier. «Career expectations have shifted for many younger professionals, and Gen Z tends to be especially intentional about finding roles that align with where they want to go professionally,» said Dawn Fay, operational president at Robert Half. «When they feel stalled or don’t see room to grow, they seem to be comfortable exploring new opportunities rather than waiting for those circumstances to change.»
There are tentative signs of improvement. A September update from the Bank of America Institute found job-switching pay premiums had climbed to their highest level in more than three years, with Gen Z still seeing the biggest gains from changing jobs. But premiums remain below pre-pandemic levels, and the broader trend suggests the era when a new employer reliably delivered a double-digit raise has not yet returned.
The changing dynamics also carry implications for career development. New research from the National Bureau of Economic Research suggests that a varied résumé matters more than ever for those aiming for the top job. Newly appointed chief executives now have roughly ten more years of experience outside the company they eventually lead than their counterparts did in 2000, a shift attributed to rising demand for broad, generalist experience. That is precisely the kind of grounding that job-hopping once helped younger workers build — and an opportunity that is narrowing for recent graduates.
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