Author Topic: Forbes: Employees who stay at company >2 years earn 50% less over lifetime  (Read 6306 times)

bryan995

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Forbes: Employees who stay at a company for more than 2 years on average earn 50% less.
https://www.forbes.com/sites/cameronkeng/2014/06/22/employees-that-stay-in-companies-longer-than-2-years-get-paid-50-less/

Some already great discussions over on reddit (in case you had not yet seen this).
https://www.reddit.com/r/personalfinance/comments/6no7nu/forbes_employees_who_stay_at_a_company_for_more/

To me, this is 100% obvious and I plan to follow this until FIRE. This may only work in STEM/TECH but IMO the proper job cycle is:
Year 1 - assimilate with new company/team - learn new tech/infastructure/team dynamics, excel at job
Year 2 - job becomes easier, use available time to learn new skills and fill in your gaps.
Leverage years 1/2 into better job with 20-30% compensation bump


When you also factor in the front loaded benefits (relo, starting bonus), you can come out way ahead jumping ship every 2 years.   Companies are basically paying you (more) to move to new exciting cities every 2 years, experience new teams dynamics / company processes, learn all new tech/skills and meet new interesting/fun people. win win win win

The difference between the above method and the more traditional (grind out a tenure at a single company) in terms of compensation looks just like a graph of compounding vs non-compounding investments.

Green (principal) = staying at jobs for 10+ years with 0 raises
Blue (interest - no compounding) = staying at job for 10+ years with traditional 2-3% YOY cost of living adjustment
Purple (compound interest) = switching jobs every two years with ~20% compensation increase (+relo +starting bonus) - in reality this would be more of a 'steppy' plot.


After 3-4 cycles of this, FIRE.

Thoughts?  Anyone else in STEM/TECH and doing and or planning to do something similar to this?
« Last Edit: July 22, 2017, 07:38:28 AM by bryan995 »

I'm a red panda

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Most places seem to have 5 year vesting for retirement though. My company puts in 13% so leaving without vesting would be significant.

lost_in_the_endless_aisle

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"In 2014, the average employee is going to earn less than a 1% raise and there is very little that we can do to change management’s decision. But, we can decide whether we want to stay at a company that is going to give us a raise for less than 1%. The average raise an employee receives for leaving is between a 10% to 20% increase in salary."

Selection bias?

Alternate headline: people who have have fewer skills in high demand in the market see little incentive to job-hop

Or how about this: Risk averse people trade wage increases for employment stability

I'm not denying there is a stickiness of wages in both directions for long-term incumbents but attributing all of the difference to job-hopping and ignoring the selection bias in the two populations misses some of the causal factors.


bryan995

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Most places seem to have 5 year vesting for retirement though. My company puts in 13% so leaving without vesting would be significant.

I have a 4 year vesting for 401k stock, but do not have near a 13% match.  I would be leaving ~5k on the table in 401k match, and ~40k of unvested RSU.   Having potentially lost benefits from the move is something that can be easily negotiated during the interview process, recruiters know this and are equipped to deal with this (usually in the form of a starting-bonus that will offset any losses). 


Risk averse people trade wage increases for employment stability

I'm not denying there is a stickiness of wages in both directions for long-term incumbents but attributing all of the difference to job-hopping and ignoring the selection bias in the two populations misses some of the causal factors.

I totally agree re. the selection bias - and that would certainly be an appropriate title. 
This article is more for the tech/stem fields. 

But there should be little risk in exploring new job opportunities while currently employed.
We would also have to account for the increase in one's skills following starting at a new employer.  That increase in skills will translate to increased desirability from future employers (and increased compensation).

I do wonder if many of us here are being a bit too risk-adverse when it comes to employement and the sense of job-stability.
« Last Edit: July 22, 2017, 07:33:42 AM by bryan995 »

lost_in_the_endless_aisle

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To be more clear, I mean stability partially in the sense of geography. I know a couple of people who just passed up large compensation increases because the new job was located somewhere they didn't want to live (didn't like that part of the country, didn't want to move away from family, felt they had already uprooted their kids too many times and it was impacting their development, etc., etc.). Also, there is stability with respect to corporate culture (one that you know and like being preferable to one that is less well known that you may find to be inferior).

I also know several people who job hopped and then (within a year) got laid off at their new job. Sometimes the warm safe pouch of a company where you have built up political capital can protect you from being targeted in RIFs.

I'm not against job hopping and understand that avoiding it has costs, just pointing out there are also benefits to tenure. Also, the casual conclusion implied by the Forbes article is plausible but one has to control for (potentially significant) selection bias in job hoppers.

Mgmny

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This is for sure true with me (healthcare software industry). My job hopping has doubled my salary in 3 year. If I stayed at company 1, I'd maybe be making 5% more. Life is too short to let the first company your get an offer from determine your salary and FIRE date!

Blonde Lawyer

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I'd say this depends on the field. There are some jobs where you end up back at the bottom each time you move and pay increases come from seniority not years of experience.

Broadway2019

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This is true to a degree. I have job hopped 3 times over 8 years and did get great raises. However, now my salary is leveling out. So before I could jump 15-20%, however, now I am already making at the top end for my field/experience. Most employers now could not afford me and there are very few I could move to, to get a better overall package. I may be able to get higher compensation, but fewer benefits. Or vice versa. I think eventually it evens out and is not worth it to move.

In addition, moving every 2-3 years is great when young and single. Switching jobs is exciting, but there is also a learning curve which requires more work in the beginning. Eventually, when you have a family, you want to work less so learning a whole new job and company sounds exhausting.
« Last Edit: July 22, 2017, 08:36:31 PM by kwarden13 »

lost_in_the_endless_aisle

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This is for sure true with me (healthcare software industry). My job hopping has doubled my salary in 3 year. If I stayed at company 1, I'd maybe be making 5% more. Life is too short to let the first company your get an offer from determine your salary and FIRE date!
I have had the same employer for 9 years and will be making 5x my 1st year wage this year (was making 2x by year 3 or 4). Also, I've never asked for a raise but have received them consistently. Maybe my experience isn't typical though (I've always had bosses in the range from decent to great who have fought on my behalf; also, a fair amount of the compensation is structured as restricted stock vesting over 4 years, so there is a OMY problem with staying on with my employer).

Gondolin

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Quote
Thoughts?  Anyone else in STEM/TECH and doing and or planning to do something similar to this?

All this is known, khalessi.

It's a viable plan for some industries in some places. And by that I mean mostly computer scientists/programmers in cities with hot tech scenes. That said, for every redditor who claims to have had 5 employers in their first 10 years with a 500% salary increase, there are a dozen who found out that opportunities weren't as plentiful as they thought, or got married and had to juggle two careers, or hit a ceiling on their soft skills or weren't able to "upskill" themselves fast enough in the right skills.

Obviously, everyone recognizes that the days of life time employment at one place are over and that not switching employers will cause you to fall behind. Jumping is the way to go yet, the assumption of continual easy transitions at large pay increases is often unfounded.

TheAnonOne

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Quote
Thoughts?  Anyone else in STEM/TECH and doing and or planning to do something similar to this?

All this is known, khalessi.

It's a viable plan for some industries in some places. And by that I mean mostly computer scientists/programmers in cities with hot tech scenes. That said, for every redditor who claims to have had 5 employers in their first 10 years with a 500% salary increase, there are a dozen who found out that opportunities weren't as plentiful as they thought, or got married and had to juggle two careers, or hit a ceiling on their soft skills or weren't able to "upskill" themselves fast enough in the right skills.

Obviously, everyone recognizes that the days of life time employment at one place are over and that not switching employers will cause you to fall behind. Jumping is the way to go yet, the assumption of continual easy transitions at large pay increases is often unfounded.

Software guy here, I fell into contracting early on, and in the first 5 years moved from...

35k- 4 months
42k- 8 months
55k- 6 months
95k- 6 months first contracting role
165k- 2.5 years
205k- 18 months

and now it falls between 160-180k depending on overtime and rates.

Job hopping has, for the most part, made me rich and well on my way to FIRE by 32

ysette9

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Here is Silicon Valley my husband and I make an interesting pétri dish for this experiment. We are both engineers (different disciplines) with similar degrees from the same schools. He has gone the typical route of changing companies every few years while I have had different jobs at the same company the entire time. He is hard working, smart, and generally performs very well. I have been in a couple of development programs and been flagged as "high potential". My career track is one of the better/faster ones in my company.

He has almost always earned more than me, and 12+ years into our careers he still out earns me by a smidge, however his benefits are a lot better. My job has more stability and I feel pretty confident that I would be one of the last to be let go in a downturn. I also have enjoyed better work\life balance at my company. Sometimes I say that my job stability allows my husband to take more risks with his career, but the truth is that we are both pretty risk-averse so he also goes for stable-ish companies with a good base salary versus taking a gamble on a startup with lots of options.

Goldielocks

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Hmm.  some drawbacks though..

5 year pension vesting.
3-6 month waiting period for health care to kick in each time.

Works well when you WANT to move to new cities for the new job offer.  Starts to suck when your SO doesn't want to move.  Also, doesn't work if you start to take time off for babies.  Having a longer history with your employer really helps when the babies start coming, IMO.   Employers and bosses are a lot more flexible on a personal / day to day  / back to work with a promotion level.

In my engineering career, some switching, yes, was beneficial... but working for a large company (10 years) let me switch projects / team leaders / cities at least every 2 years to significantly better roles.  I had to be willing to travel and even relocate, but I got the same impact.  I think the answer is just to switch up your day job / responsibilities every couple of years.

ysette9

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Quote
5 year pension vesting.
3-6 month waiting period for health care to kick in each time.

These, including the geographical switches, are huge barriers and I don't blame anyone for not jumping ship under those conditions. As an employer, it seems having such policies is a terrible disincentive for people to join your team. I've never even heard of waiting periods for health care coverage. My company had the 5-year vesting period for pension as well, but since pensions are almost gone and my 401(k) was immediately vested, this is no longer an issue.

Perhaps the difference is that we are in Silicon Valley, so people can and do move companies all the time without uprooting their families or screwing up the other partner's career. It is easy for me to forget that it isn't that way in the rest of the country.

Laura33

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1.  Overall, true in my DH's field (EE) and experience for the first @ 10 years.

2.  But selection bias overstates the impact. It's like all those insurance commercials that say "people who switched saved $XXX" -- because, duh, the people who wouldn't save money wouldn't switch.  If you're doing well, there is no incentive to jump to a new employer unless it provides a significant raise/bonus/promotion; and if you're not doing well, you're not going to have those same options.

3.  Two careers/families/geographical restrictions makes this a less realistic path forward as you get married and have kids -- if you have to move for the opportunity, one partner's pay bump might be at least partially offset by the other's paycut (ask me how I know).

4.  Once you get to the Golden Handcuffs level, this no longer applies.  DH now gets stock options as part of his annual bonus plan, and they vest on a 3-year schedule.  After a few years of that, no other company is going to pay him enough to offset the loss of those options.

Tl;dr:  If you are in the right field, this can be an excellent way to grow your income and experience for the first decade or so, but don't assume it applies to everyone or plan on it lasting forever.

MsSindy

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Hmm.  some drawbacks though..

5 year pension vesting.
3-6 month waiting period for health care to kick in each time.

I haven't seen the health care waiting period, and pensions are all but gone.... however, 401k vesting period is often 3 - 5 years for the employer matched portion.  When I took my last (and final) jump to a new employer, what sucked for me was going from 4 weeks vacation back to 3 weeks... I was able to negotiate a damn good salary/benefits package, but they wouldn't budge on vacation time - next year I hit 5 years here and will be back to 4 weeks - for this alone, job hopping sucks.

dreams_and_discoveries

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I'm a big believer in changing roles every 3 years as a rule, whether this is inside a company or outside depending on what is around at the time.

Personally, I've found going outside the company gets you bigger payrises, and contracting gets you the biggest pay rise.  You do obviously take a much bigger risk contracting, and get no perks or benefits other than cold hard cash. You need to be reliable, and able to work well with clients and deliver what they want.

  • Job 1 Company 1 - £16k
  • Job 2 Company 1 - £20k
  • Job 3 Company 1 - £30k
  • Job 4 Company 2 - £44k
  • Job 5 Contract - £500 day
  • Job 6 Contract - £535 day
  • Job 7 Contract - £575 day

Inaya

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Job 1: $37,500, no benefits
Job 2: $40,000, mediocre benefits (ending salary $42000)
Job 3: $81,000, great benefits (current $92000)

It's worked out for me so far, but I'm pretty sure I am overpaid enough (I'm a technical writer getting almost same pay as an engineer with the same title) that I would take a pay cut no matter where I moved. Plus, they're paying for 90% of my masters, and I have to stay put for 2 years after I graduate.
« Last Edit: July 27, 2017, 10:33:29 AM by Inaya »

mandy_2002

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I think that the previous comment of "change jobs, but not necessarily companies" is pretty valid in my case.  I worked in chemical engineering for just shy of 10 years.  While in college, I co-oped with two companies, and during that time made $43k-$50k  (on an annual basis; 1 years of this counted towards my 10 years).  Straight out of college I was making $72k plus pension and benefits.  Every 18 months-3 years I changed roles dramatically with the company, and each of these changes came with promotions (plus an extra thrown in there at the beginning because my leader was awesome).  By the time I left, I was at double the starting salary with higher bonuses and vested in a pension that will provide my entire monthly spend when I decide to start pulling from it. 

I know that I was not the norm at my company, however.  I was put on the "high potential" list, which helped my promotions and raises immensely.  Others in the company were not seeing the same thing I was because of this status. 

MrMoogle

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This seems skewed for people who hop to get a higher step on the management ladder (even in STEM fields).  I've been working for 10 years, switched twice, and I make more than others I know who have switched 4-5 times who are working at the same level as I am, with the same hours.  But I make less than people who have taken a more management role who have switched a few times.  I've stayed technical, and sadly don't make as much as managers typically make. 

Goldielocks

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Hmm.  some drawbacks though..

5 year pension vesting.
3-6 month waiting period for health care to kick in each time.

I haven't seen the health care waiting period, and pensions are all but gone.... however, 401k vesting period is often 3 - 5 years for the employer matched portion.  When I took my last (and final) jump to a new employer, what sucked for me was going from 4 weeks vacation back to 3 weeks... I was able to negotiate a damn good salary/benefits package, but they wouldn't budge on vacation time - next year I hit 5 years here and will be back to 4 weeks - for this alone, job hopping sucks.

The waiting period is a canada thing.  Extended Medical / Dental  / Vision coverage..  basic doctors and hospitals are covered by the province, but the rest is a benefit plan, that requires you to be working for up to 4 months before qualifying and some employers insist on probation for 6 months.   

In contrast, only US employers have 5 year vesting that i have seen.  2 years is more normal here, or even the same 3-6 month period before you can begin in the pension plan / company plan, but it is vested immediately.

Guide2003

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Definitely wouldn't work as a government employee (wage grade or military). You have to stay for the full 20 to get the pension currently (although that's changing in a few months) although your resume does look more impressive if you short-tour out of every assignment and have a wider variety of senior officers signing off your employee reviews. Those that chose to settle in and master their craft are always embittered when people pull that kind of move, but to each their own. The people who dig in and master their craft are usually not the type of people who want to make it to the top of the pyramid, and vice versa.

Sarah Saverdink

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While job hopping early in your career can boost income significantly, at some point you will price yourself out of the market and level off.

The husband and I are both in STEM. We have both been flagged as high-potential at our respective employers. Over the past 4 years, our raises have been between 6% - 10% each year, plus we each earned a promotion with a ~10% raise in that time frame. Big raises exist (assuming the company is doing well), but you have to be a high-performer. I'm a manager and the budget for raises is 2.25% per employee... in order for high-performers to get more, the lower performers get less.