Wage Differential and Job Changes

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Working Paper Number: SEHSD-WP1990-10 or SIPP-WP-118

Job mobility has traditionally served as a primary adjustment process for workers and employers. The economic conditions affecting job mobility decisions range from discretionary choice factors such as a desire for better pay, working conditions, and opportunities for advancement to exogenous factors beyond the control of workers—for example, plant relocations and shutdowns, recessionary or structural declines in the demand for labor, and technological change. This distinction between mobility emulating from discretionary factors and mobility resulting from exogenous changes suggests that in analyzing job changing behavior, it is useful to separate workers into three groups: voluntary movers, involuntary movers, and stayers. Analysis of determinants of the job, changing behavior of members of the first two groups is important in gaining a better understanding of worker mobility and labor market flexibility. For example, worker response to wage differences between current jobs and potential alternative jobs helps determine whether such differences serve as an efficient labor supply adjustment mechanism. A related concern is the role of specific and general human capital on job moves and wages.

Page Last Revised - October 8, 2021