Occupational mobility and wage growth

Author: Simonetta Longhi
Institution: Institute for Social and Economic Research, University of Essex
Type of case study: Research

About the research

There is growing evidence that the accumulation of occupation-specific human capital plays an important role in the wage determination process. A number of studies find substantial returns to occupational experience and that the sizes of these returns vary across occupations. This suggests that high levels of occupational mobility can severely inhibit a person's career wage growth.

This study draws on data from the UK Labour Force Survey to explore whether unemployed job seekers compete for jobs with workers looking for a new or an additional job. The focus is on differences in occupational mobility of unemployed and employed job seekers. More specifically, this study looks at whether unemployed and employed job seekers look for work in the same occupation and whether the occupational mobility of the unemployed is similar to that of unemployed people. The aim is to analyse whether the presence of employed job seekers in the labour market has an impact on the labour market outcomes of unemployed people.

The research findings indicate substantial differences between the two groups, both in terms of old occupation and new occupation.

In short, this study illustrates that there are substantial differences in occupational mobility between job seekers: employed job seekers are most likely to move to occupations paying higher average wages relative to their previous occupation, while unemployed job seekers are most likely to move to lower paying occupations. Employed and unemployed job seekers exhibit different patterns of occupational mobility and, therefore, do not accept the same types of jobs.

Methodology

The analysis is based on multinomial models to compare the previous and new occupation of unemployed and employed job seekers in terms of standard occupational codes (SOC) and wages. More specifically, the methodology consists in Identifying employed people searching for a new job by using a set of questions on job search. This is possible because the LFS asks the same set of questions on job search activities to everybody (while many other surveys only ask these questions to unemployed people). Then, among employed and unemployed job seekers only those who find a job are kept, so that comparisons with previous and new occupation of these two types of groups can be made. At first, occupational codes (SOC) are compared to analyse to what extent there is occupational change. These steps give results that are very similar for employed and unemployed job seekers. Hence, the average wages of previous and current occupation are also compared to identify and analyse whether people move upwards or downwards.

Publications

This research was featured in the following academic journal:

Longhi S., and Taylor M. (2013) ‘Occupational change and mobility among employed and unemployed job seekers’, Scottish Journal of Political Economy, 60(1), pp. 70-101. doi: 10.1111/sjpe.12003 Retrieved 2 September 2013 from http://onlinelibrary.wiley.com/doi/10.1111/sjpe.12003/pdf

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