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The times, they are a-changin’: Why employee turnover is the norm in the modern economy

April 12, 2023 — Modern Economy Project

Throughout the late 20th century and into the early 2000s, employment changes were considered major life events. Employee turnover was historically looked at as a detriment for the employee. That is why we have COBRA insurance, workforce development programs for recently unemployed and other federal programs.

But the modern worker is turning that on its head.

Employee turnover remains at historically high rates, even after the post-pandemic peak of the so-called “Great Resignation.”

The shift in Americans’ relationship with work and openness to changing jobs more frequently has been a long time in the making. The median tenure at an employer has declined over time, according to the Bureau of Labor Statistics, with the median tenure lowest for employees age 24 and younger.

The outdated expectation so prevalent in previous generations that people would remain tethered to the same employer for their entire careers in exchange for job security is long gone. Now, there’s increasing recognition that “job hopping” is better for people’s careers.

In today’s economy, the reality is that people are more likely to acquire needed skills and experience, and secure higher salaries and career advancement, by changing jobs.

Nowhere are these benefits more apparent than in Washington, where the regular switching of jobs and offices is practically a pastime. Along the way, staffers become senior staffers, subject matter experts and expand their capabilities to the benefit of future bosses.

Younger workers in particular don’t subscribe to the idea that it’s necessary for their skills and experience to stay with the same employer for years on end. A recent Gallup report found that 21 percent of millennials reported changing jobs within the past year, which is more than three times the number of non-millennials.

Data from payroll processor ADP found that the annual pay rate has increased for job changers at a faster rate than people who stayed in their jobs. After all, it’s almost always easier to ask for a higher salary at the market rate from a new employer than to ask your current boss for a raise. And to lure workers in a hot job market, sign-on bonuses have become increasingly common.

It’s also easier to achieve professional growth and gain new skills by changing jobs, rather than waiting for a promotion from a current employer. People with a diversity of experiences are, in turn, more attractive to employers looking for workers who can tackle a variety of challenges.

Finally, workers today want flexibility, which comes partly from diversifying income sources and changing jobs frequently to align with their skills.

A survey from Upwork, a popular platform for freelancers looking for work, found that the proportion of freelancers in the U.S. workforce reached an all-time high in 2022. Its survey showed that 37 percent of U.S. workers in 2022 had more than one employer, job or contract project.

The report estimated that freelancers contributed $1.3 trillion to the U.S. economy – a $50 billion increase since the year prior. Millennials and Gen Z were the most likely professionals to freelance, with 43 percent of Gen Z professionals and 46 percent of Millennial professionals performing freelance work.

It’s clear that changing jobs can be a good thing for people’s career advancement and their bottom line. Employers are recognizing that this is becoming the norm in our modern economy.

In a future blog post here at the Modern Economy Project, we’ll be exploring policy opportunities for lawmakers to support workers’ demand for increased flexibility. Learning to adapt to this new reality will make our workforce, and our employers, stronger together.

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