Pay gap widens between workers who switch jobs and those who stay
When AI startup Serval set out to fill 100 engineering roles this fall, it rolled out a $30,000 signing bonus, $30,000 payments to current employees whose referrals get hired and a $10,000 vacation added on top of the offer, the Wall Street Journal reported. The package illustrates a split in the U.S. labor market: even though the tech industry has faced the brunt of U.S.-based job cuts this year, corners of the industry remain hypercompetitive, with rich compensation and top talent holding the upper hand.
“We need software engineers. We need deployment strategists,” said Carlos Lezama, Serval’s head of talent. “Anthropic and OpenAI are taking a lot of talent.”
ADP chief economist Nela Richardson described the strength as concentrated in specialized work. “We’ve seen a ramp-up in salaries and employment in the most specialized parts of the tech sector,” said Richardson. The technology industry topped median wage growth in the third quarter, according to Payscale, which measures sector-level changes, and a Payscale market survey and compensation analysis show agentic AI specialists can land measurable salary premiums.
The broader data also point to resilience. Hiring defied expectations in October, with 165,000 jobs added, in a sign the labor market is strengthening despite worries about AI, according to the report. The salary gap between so-called job huggers and job switchers across industries has been widening since the summer, according to the latest federal data, and workers who do land new roles are getting bigger pay bumps, especially in segments of technology, construction and manufacturing stoked by America’s AI boom.
Construction and manufacturing workers have seen some of the largest boosts from changing jobs, with pay-growth premiums of nearly 11% and 5.5% respectively, ADP data shows. Many new construction and manufacturing projects in the U.S. involve building data centers and the chips used to power them.
The premiums reach the skilled trades. In some areas of the Washington, D.C., metro region, electricians working on data center-related build-outs are paid substantially more than on commercial or residential projects. Data-center work in one area of Virginia’s tech alley corridor is paying journeymen electricians $70 an hour, compared with the union’s base rate of $62, said Adam Boles, a business representative for IBEW Local 26, which represents electricians in Washington, D.C., Maryland and Virginia. The jobs come with benefits such as health insurance, plus overtime and even double-time pay in certain cases.
Inside companies, pay structures are lagging the technology. AI adoption is happening across industries faster than companies can adjust their pay structures, which can create employee flight risk, according to Ruth Thomas, chief compensation strategist with Payscale. The company’s report found 56% of employees believe they should be paid more for developing AI skills, but only 16% reported actual pay increases tied to AI learning.
New hires are also outearning existing employees at the same level, according to an analysis from Levels.fyi, a salary platform that collects offer data from employees of big tech companies and top-tier startups. Over the past year, the median base salary for new software engineer offers was 4% higher than for current employees at the entry level, and the gap widened to a 17% premium at the most senior levels.
“The market we’re in right now is oddly a buyer’s and a seller’s market at the same time,” said Mohit Bhende, chief executive of Karat, an interview platform for engineers. While companies still hold a great deal of leverage, software engineers do not have to be capable of building frontier models to command a premium in this market, he said. “I’m just talking about a good software engineer with the fundamentals to know how to use AI efficiently,” Bhende said. “Those people know that the market is highly valuing them.”
Recruiting firms see the same dynamic. Companies don’t want to train people, said Jill Hernstat, chief executive of Hernstat & Co., a recruiting firm based in the San Francisco Bay Area, so candidates who can prove they have hands-on experience using AI tools efficiently are “golden.” “There’s so much business in the AI space, and it’s like ‘we’d rather steal someone else’s person,’” she said. “Companies are willing to pay more for the right skill set, particularly when there’s an immediate need. They want people who can hit the ground running.”
For individual workers, switching has paid. Valentino Stoll, a 42-year-old AI software engineer in New Jersey, left a job in July where he was making around $260,000 for a product engineer role at a smaller tech startup — and got a boost in pay. “I was honestly surprised by it because it’s a smaller company,” Stoll said, adding that he was promoted after a few months on the job. Stoll, who has a history of building AI in products, said he has seen AI change expectations around who gets hired. “If you are looking for a change, find how AI fits into whatever you want to be working on, and pursue that,” he said.
John Lee, a 41-year-old systems engineer in Denver who works in the defense and aerospace industry and has held jobs with companies including Lockheed Martin and Northrop Grumman, said job hopping has given him significant pay bumps. A new role boosted his salary to $300,000 this year, up from $59,000 when he started out in 2008, said Lee, a married father of two. “Money talks sometimes,” he said.