Are American Workers Becoming Fickler?

With the millennial generation entering the labor force, there is much talk that this new generation of workers is more mobile and will work for dozens of companies over their careers. Some observers also say that American workers, in general, are not loyal to the firms that hire them.

Are those claims supported by facts, or are they just fueled by anecdotal stories from Silicon Valley or other high-tech hotspots where young tech workers jump from job to job for ever-growing pay packages or stock options?  A Bureau of Labor Statistics (BLS) report provides some answers to that question.

Since 1996, BLS has published a biennial report on employee tenure which measures how long workers have been with their current employers. The latest data for 2016 indicate that median employee tenure for all American workers was 4.2 years. That means half of workers stayed with their employers for more than 4.2 years, and half stayed for less. In addition, the median employee tenure for men was 4.3 years, slightly higher than that for women at 4.0 years.

BLS also reported that the median employee tenure for 2016 was down from 2014, which was 4.6 years. This decline suggests that the average worker stayed with their employers for a shorter time. Is this the evidence that employees are becoming more fickle and less loyal?

The answer is “no.”  

From a historic perspective, this decline is not unexpected. It represents employee tenure reversing to its historic norm. It does not signal a fundamental change in employee loyalty.

While employee tenure declined in 2016, it was not low by historic standards. As shown in the following chart that goes back 20 years, employee tenure was the lowest in 2000 (it dropped to 3.5 years) when millennials were still in elementary school. In fact, the median employee tenure was below 4.0 years throughout the second half of the 1990s and the first half of 2000s. 

We cannot attribute the recent decline in employee tenure as evidence that today’s workers are less loyal. If that is the case, why was employee tenure even lower at the turn of the century?

It is likely that the high employee tenure from 2010 to 2014 is the result of the Great Recession of 2007-2009 and the slow recovery thereafter. The U.S. economy lost 8.7 million jobs due to the recession and the unemployment rate reached as high as 10.0% in October 2009. Jobs did not start to grow until June 2010.

Facing high unemployment and limited job opportunities, it is not surprising that American workers held onto their jobs and were reluctant to change. The slow economic recovery reinforced the perception that the job market remained weak and people continued to safeguard their jobs well into the recovery. 

The pace of job creation picked up in the last couple of years and we are now in the 8^th year of continuous economic expansion.  As expected, employee tenure declines as workers become more optimistic about the job market and are not afraid of leaving their employers to pursue other opportunities.

Even for younger workers (between the age of 25 and 34), the current employee tenure of 2.8 years is not different from the tenure of younger workers before the Great Recession, or younger workers of the late 1990s. The data do not provide evidence that today’s younger workers change jobs more frequently than their counterparts of the past.

The news stories of young millennials job-hopping may well be true, but that might be just for high-tech industries with fast-paced innovations and ever-present new opportunities. Tech-jobs are growing rapidly, but they still account for only a fraction of the American labor force. Many millennials will be working at retail shops, healthcare facilities, manufacturing plants, banks, or business offices. Changes in those industries can be modest and workers may settle in their careers for a long period of time.  Job-hopping can also occur in the regions where rapid growths occur. 

There is little evidence that American workers are more fickle. Instead, the driving force for employee tenure is more likely to be the fundamental economic conditions of the country, a region, or an industry.