OOO: The price you pay for keeping salaries stagnant

In partnership with

Learn AI in 5 minutes a day

This is the easiest way for a busy person wanting to learn AI in as little time as possible:

1. Sign up for The Rundown AI newsletter

2. They send you 5-minute email updates on the latest AI news and how to use it

3. You learn how to become 2x more productive by leveraging AI

Sign up to start learning.

Despite the pandemic throwing a wrench in many lives, per capita income in the U.S. managed to grow steadily from 2014–2022, according to the Census. Then, in 2023, recent progress reversed, with income dipping for the first time in a decade. We even saw the country’s poverty rate increase at this time, potentially as a result of pandemic-era stimulus programs expiring as well as inflation continuing to rise.

Still, people know what they’re worth (or, more accurately, what they need to literally survive 🤷‍♀️ — and hopefully even thrive).

“Rising costs of living are putting real financial pressure on employees, regardless of what they’re currently earning,” said James Lloyd-Townshend, chairman and CEO of tech talent firm Tenth Revolution Group. “It’s a simple fact that pay packets don’t stretch as far as they used to.”

This may be part of the reason why quit rates remain high in industries ranging from leisure and hospitality to manufacturing, finance and tech. In the tech sector, 47% of professionals are actively seeking new roles, up dramatically from 29% just a year ago, according to a recent Dice survey. Tenth Revolution Group research suggests stagnant salaries play a big role in departures.

Whether it’s laying people off only to rehire, or failing to retain employees in the first place, the cost of replacement is, quite frankly, gnarly. Gallup estimates that replacing leaders and managers costs around 200% of their salary. Tech professional replacement costs about 80% of their salary, while frontline employee replacement runs at 40%.

Pheeeew. So if money retains, just how much are we talking?

21%

U.S. tech professionals demand an average 21% pay increase to stay in their roles, Tenth Revolution Group research shows. For those looking to change jobs, the required pay increase is even steeper at 25%.

Lloyd-Townshend already noted the cost of living increases as a key factor in employees demanding higher pay. “Combine that with the value tech professionals bring to an organization, add in the fact that the talent pool is small and their skills are in high demand and difficult to replace, and you have a group of professionals who are able to set higher expectations for their pay and conditions than a lot of workers from other sectors are able to,” he said.

“The reality is that businesses that wait until their employees are ready to leave are going to be forced into taking costly action, whether that’s making a huge counteroffer or having to outbid competitors when it comes to attracting a replacement,” Lloyd-Townshend added.

And it’s not just money. As I talked about last month, factors like crappy workplace culture fuel turnover, too.

In the end, it costs less to treat your employees the way they deserve than to let them fall by the wayside and try again. Fancy that!

Thanks,