Gap in 'real' pay between 'stayers' and 'switchers' grows in Minnesota

Inflation is nibbling away wages in the post-COVID era, especially among Minnesotans who stayed true to their current employers, a new state study found.

Median "real" or inflation-adjusted wages sank 1% for those who stayed at their jobs and rose 6% for those who switched jobs last year, according to the report released Thursday by the Minnesota Department of Employment and Economic Development (DEED).

By comparison — when looking at the fourth quarter of 2018, before the pandemic fueled high rates of inflation — real wages grew for those who stayed (1.7%) and those who switched (6.1%) employers.

"What has changed the most is the gap in wage growth between stayers and switchers, which became wider in the post-COVID period," said state senior labor market research analyst Alessia Leibert. "If this differential continues to grow, more workers will have an economic incentive to switch, and Minnesota employers may face higher-than-typical turnover in future months."

Younger workers, ages 18 to 25, and those making less money tended to switch jobs at greater rates and received the largest wage hikes.

Industries experiencing the highest staff turnover rates include accommodation, food service, nursing home, home health and retail sectors.

The boost in wages from switching employers increases "the economic incentive for workers to switch," Leibert said. In most cases, workers who stayed in their present jobs "did not obtain enough pay increase to offset inflation."

The financial advantages and disadvantages of keeping a job varied widely by industry. Workers who kept their education, government, hospital/clinic and factory jobs saw median real wages shrink after the pandemic by 3.3%, 2.1%, 1% and 0.9%, respectively. Across the state, those four sectors had the highest rates of worker retention.

The percentage of people who kept their jobs — which the researchers call "stayers" — between the fourth quarter 2018 and the fourth quarter 2019 was 72.6%. This dropped to 70.3% between the first quarter 2021 and the first quarter this year.

While job changers — who researchers call "switchers" — held relatively steady at 18.3%, the number of Minnesotans leaving employment for good rose from 9 to 11.5% during the same time period.

The cry for higher wages — among other issues — has launched new rounds of union activity in Minnesota hospitals and clinics, and at retail stores such as Half Price Books, Starbucks and Trader Joe's. Most recently, video crew workers at the United FC soccer franchise and some workers at the Guthrie have voted to join labor unions.

Meanwhile, employers say they are struggling to fill jobs. The state has nearly 2.5 job openings for every unemployed person in Minnesota.

Charlie Weaver, executive director of the Minnesota Business Partnership, which represents the CEOs and top executives of more than 100 of Minnesota's largest businesses, said his members all struggle with a shortage of workers.

Part of the problem, he said, is just that companies are growing and in need of more workers. The other part of the equation is workers leaving, whether it be for new jobs with better pay or retirement.

"My guess is it's 50/50," Weaver said. In conversations with leaders at Digi-Key, Polaris, Marvin Windows, Andersen Windows and other firms, inflation and the labor shortage are "a challenge ... It's huge."

Some companies with rural operations "are losing money every single day because they don't have enough workers," he said.

The combination of inflation and worker shortages has prompted firms to re-evaluate benefits and wages, ramp up recruiting efforts and, in some cases, reconsider factory expansions. Some companies are exploring immigrant worker programs while others are working with young people to attract new hires they can train, Weaver said.