Quits and ladders: does mobility improve outcomes?

The purpose of this paper is to compare internal and external job mobility (quits and promotions) as separate mechanisms for workers improving earnings and job fit.

The authors sample the core workforce from the British Household Panel Survey, estimating the effects of quits and promotions on two sets of outcomes. The first is subjective; satisfaction with work, pay and hours. The second is objective realities about the job; gross monthly pay and weekly working hours. The authors use linear fixed-effects estimation to control for individual heterogeneity.

Quits and promotions are distinctly different mechanisms for improving earnings and job fit. Quits improve measures of job fit (satisfaction with work, pay and hours) but have little effect on earnings. Internal promotions bring earnings growth but have little effect on job fit. The findings shed light what drives “voluntary” mobility; internal mobility may be driven by higher “reservation wages” and career progression, while external mobility may be driven by job matching and the need to find more appropriate work.

Researchers should treat mobile labour markets with scepticism. The growth of “boundaryless careers” may closer resemble a release valve for poor working conditions in a varied market than a growth in new opportunities for earnings and career progression.

Studies of job mobility overwhelmingly focus on the effects quitting without explicitly comparing this mobility to promotions. This omission gives an incomplete picture of mobility. Bringing promotions back into the discussion, helps to understand why workers commit to internal careers and firm tenure. The paper shows that quits and promotions yield distinctly different outcomes for core workers, despite both mobility types being labelled “voluntary”. Thus, the authors show that inequality in earnings and working conditions is closely tied to access to the “life-chances” of mobility; those who are able to pursue promotion are rewarded objectively; those who quit for a new employer seek a better job fit.