Climbing the wage ladder: Linking job mobility and wages

Author: Aaron Wong

Real wages have declined over the past 4 years with inflation outpacing wages growth. Switching jobs is one of the best ways to secure a sizeable pay rise. But the rate at which workers move between jobs has declined in recent decades. New analysis in this note sheds light on the size of the gains that are being foregone.

  • Switching jobs is associated with pay increases 9 percentage points larger than the average pay rise when you stay at the same job. This is $5,700 more for the typical worker.
  • Young workers are the largest beneficiaries from job switching, earning on average $7,500 more per year than job stayers.
  • Wage gains accelerated as pandemic-related uncertainty evaporated and policies were unwound. They are also larger in capital cities compared to the regions, reflecting the more dynamic labour markets in the cities.

This research shows that reforms to address unnecessary and artificial barriers to mobility in labour and housing markets may be one of the best ways to get wages moving for Australian workers.