Switching jobs is usually the better option if your goal is simply to maximize your income in the short term.
It’s time for your annual review. You and your boss hop on Zoom and open with the classic small talk before getting down to it.
You did well, yadda yadda, here’s an opportunity, cool. And you’re getting a raise! Sweet.
There’s just one problem. It’s not as high as you wanted, and nowhere near as high as you believe you’re worth.
Here’s the deal: job switchers consistently earn more than job holders (ADP Workforce). Part of this may be explainable by a worker getting more skills and then switching to a job that pays them fairly for their new skill. However, that still implies their previous role didn’t have room to pay them for their new skills.
My Job History
Previously, I worked in marketing for a nonprofit in the Midwest. I earned $42,000/year my first year. After a year, I got a 7% raise.
I left that job to learn how to code and get into tech. After completing my study and getting my first tech job, I was making $63,000 working from an office in downtown Denver. Tech is difficult to get your first role in, and it gets easier after that, so I left that job after less than a year once I’d been there long enough to prove I wasn’t incompetent to my next employer.
At my next job, still in tech and still coding, I was making $85,000/year.
The numbers for these jobs will differ based on location and experience, but they’re real numbers, so I’m going to compare them:
- $44,940 -> 7% gain from previous
- $63,000 -> 40% gain from previous
- $85,000 -> 34% gain from previous
- Average year-on-year salary gain: 27%
Do this with your own salaries or previous client contracts and you’ll find a similar pattern. My first freelance coding job was $300 because I needed something on my resume and I needed to make the client an offer they couldn’t refuse (not in a godfather kind of way, of course).
How Does Switching Jobs Help You Earn More?
It would seem unfathomable to some businesses to give their employee a 27% raise. From their perspective, they would ask “how would giving a raise bring more value to the business?” The trick is it doesn’t bring additional value short term, but if it increases retention long term, then it can be a cost-saving measure—especially if the next guy comes in demanding the market rate which is now higher.
If you’re an owner you should lean towards promoting and giving greater responsibility to your employees as soon as you can. This way you can justify paying them more, with greater responsibility they’ll feel a stronger sense of ownership and stake in the business, and you’ll disincentivize them looking for a job elsewhere. If you give someone a 15% raise that can seem like a crazy amount compared to the old school 7% raise every year, but it’s a steal compared to the 27% raise you may have to pay for equivalent labor on the open market.
If you’re an employee then prioritize a job search, even if you’re just a year into your job. You may not want to leave, but what do you think will help you earn more: saying “I love this job and I’ve given a lot this year so I think I’m worth X” or “I love this job and I’ve given a lot this year and a recruiter just offered my 20% more to move to this other company so I think I’m worth X.”
The threats are empty unless you can back them up. You back them up by increasing your value with skill growth and demonstrating that value by securing competing offers.
At this stage, I’m not trying to have another W-2 job ever again. It’s either managing my own money, running my own business, or occasional contract work. However, I recognize it takes a few steps to get there so you’ll probably end up working for someone else first.
Regardless of everything written above, break free from this rat race and secure your own wealth as soon as you can. Investing and ownership yields more than your salary ever will. But if you must work a salary job, you should know how to maximize that game. Switching jobs is one way to do it.
There are always obstacles, but the freedom from the existential dread of relying on anyone else is totally worth it.