Feature
Two years ago, an ambitious employee might have texted a friend, “I just landed another job, and it comes with a big raise!”
At the time, a move to a new job would often come with a significant raise that couldn’t be obtained in their current role. Not just that, people who frequently moved between companies benefited from those regular moves. Some leaders even joked about the “musical chairs” of the labor market, scrambling to fill roles as people leapt from one company to the next.
Fast forward to today, and the music has significantly slowed down. The once-obvious playbook for employees to get a compensation bump isn’t working the way it used to.
While employees face down the changing competitive environment for jobs, HR and other work leaders are asking themselves different questions: How long will this last? How does it change my recruiting and retention strategy? What does loyalty look like in an era where employers don’t have to try to raise compensation as significantly to lose employees to their compensation ambitions?
The Great Reversal: What Changed?
Let’s start with the numbers. In January 2023, job switchers were seeing a 7.7% year-over-year pay bump compared to 5.5% for those who stayed put. By mid-2025, that premium has vanished completely. Wage growth for switchers and stayers fell to 4.3%. For the first time in over a decade, the pay gap between changing jobs and staying nearly disappeared.
Why did this happen? In spite of low unemployment numbers, the labor market has cooled. JOLTS data shows that job openings became scarcer, quit rates dropped and the ball shifted back to employers.
The “Great Resignation” ended (or at least went on an extended hiatus). More Americans are choosing to stay in positions they might otherwise leave rather than risk change in an uncertain economy. Recruiters are struggling with candidates who don’t want to be affected by a “first-in, first-out” layoff scenario. With little financial incentive to take the leap, that’s unlikely to reverse course without a change.
On the surface, a slowdown in departures can feel like relief for leaders. More stability, fewer exit interviews and less scrambling to find replacements. But it also means a challenge in engagement.
Employees who may have once left for better offers now sit tight, but not necessarily by choice. They disengage quietly, and the lack of engagement is showing in Gallup data. The risk is a more hidden cost than losing talent and having to replace a valuable employee. Being stuck in a job can drain creativity, morale and innovation far more subtly than open attrition ever could.
Improving Retention and Engagement Now
Throwing cash at a hiring problem is easy if you have it. Just ask Meta, even if it’s probably not the best way to build long-term loyalty. The same goes for throwing cash at retention. Counteroffers and promotions in response to competitive hiring practices may work in the short-term, but don’t fix underlying issues.
Some companies are turning to talent marketplaces, internal mobility and development opportunities. LinkedIn research shows what should probably be obvious: There’s a clear business case for investing in career pathing (or latticing, if you prefer). Internal moves can feel less risky, and if the pay isn’t significantly different, it can be a great investment for both employee and employer.
But policy or technology alone doesn’t make internal mobility programs a success. A culture that promotes them as a positive path is necessary.
- Do your employees know how to find their next role inside your organization?
- Is it easy to apply, or do invisible barriers keep the best talent from moving into new challenges?
- Do managers encourage their best employees to consider internal moves?
Speaking of managers, research shows that the manager-employee relationship is the single strongest driver of engagement. In a market where people can’t simply “vote with their feet” and self-select themselves out of a bad manager relationship, the stakes rise for manager quality.
Are your managers coaches or taskmasters? Are you training them to have growth conversations (not just performance reviews) and holding them accountable for internal talent mobility? When managers see mobility, development and retention as part of their scorecard, it shapes culture from the inside out.
What Else Can Improve Employee Engagement?
Compensation still matters, but it’s no longer the only piece on the board. In an environment where people are sticking with jobs they may not be delighted with, you might need to pull other levers to change the trajectory of your relationship.
As many organizations continue to pressure employees to return to the office, they have felt a reversal of fortunes when it comes to engagement. Flexibility, balance and other opportunities to meet employee needs can be a strong counter-measure to talent competitors.
A sense of purpose and deep belonging are core reasons employees stay, even when external offers beckon. Yet only 39% of U.S. employees feel that someone at work genuinely cares about them as a person, down from 47% in March 2020. That lack of alignment or belonging doesn’t show up in any HR dashboards, but it certainly is felt in the organization.
What we can’t do is try to take advantage of this moment. It’s easy to sit back and be a beneficiary of a cool labor market. A wage gap between job switchers and job stayers is the norm, not the exception, and there is no evidence that this convergence is here forever. Employees have long memories about how employers treated them when there were fewer incentives to do it well.
Making the Most of a Temporary Opportunity
Job hopping is out, thoughtful retention is in. At least for now. That makes it harder to hire but easier to keep people.
Instead of trying to squeeze employees, there’s an opportunity to invest in your (and their) future. When the cycle retreats and job hopping becomes a better strategy for both compensation and development growth, will employees see your investment or will they find more welcoming waters elsewhere?
The real test of the coming years won’t be how many people leave, but how many choose to stay for all the right reasons.
If you build the right opportunities, culture and trust, you’ll reap the right type of retention. It won’t just be low turnover numbers either. It can show up in the energy, innovation and staying power that sets your organization apart.
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Editor's note: Read more about current workplace dynamics below:
- The High Cost of Talent Hoarding — Talent hoarding is on the rise, and it hurts everyone involved. Here’s what blocking an employee's advancement can cost you — and how to avoid it.
- Modern Work Is Breaking. We Need Behavior Change, Not More Technology — Middle managers are being asked to hold modern work together, but without the tools, support or behavioral norms needed to succeed.
- The Employee Engagement Drop Nobody's Talking About — Gallup estimates poor employee engagement costs organizations $438 billion in productivity losses. So why does the drop barely register outside of HR circles?
