Occupational change and mobility among employed and unemployed job seekers

a report by Simonetta Longhi and Mark Taylor (Institute for Social and Economic Research, University of Essex) published in October 2011 under the auspices of the Economic & Social Research Council.

Abstract

We use data from the Labour Force Survey to show that employed and unemployed job seekers in Great Britain originate from different occupations and find jobs in different occupations. We find 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.

I am sure that social economists will understand the methodology of this research as described in the report which you can find here (PDF 26pp) but I have to say that I found the following most helpful.

Non-technical summary

Economic theory suggests that workers will change their job – and occupation – to improve wages over their career. However, a number of studies find substantial returns to experience accumulated within an occupation and argue that any loss of occupational experience associated with a change in occupation may result in lower wages, at least initially. This suggests that high levels of occupational mobility can severely inhibit a person’s career wage growth.

Whether a change in occupation is a positive or negative event is likely to depend on the cause of the change. For example, employed people searching for a new job will only accept job offers that are better than in their current job, either in terms of current wages, or in terms of future wage growth (or other working conditions). In contrast, people who are unemployed might be forced to accept sub-optimal jobs in order to exit unemployment and occupational change in this case might be to lower paying occupations, or occupations offering lower future wage growth. Our focus in this paper is to identify and compare the occupational mobility of employed and unemployed job seekers, a topic that has received little attention in the literature despite its potential implications. The literature has instead focused on the impact of an occupational change on short-term wage changes at the individual level, and has typically ignored whether the change is to an occupation offering higher or faster future wage growth.

We find that for both employed and unemployed job seekers the probability of finding a new job in the same occupation as the previous job is relatively low (around 30%), while more than one half experience a major occupational change (i.e. across occupations that are very different). However employed job seekers are much more likely than unemployed job seekers to move into higher paying occupations and much less likely to move into lower paying occupations. This suggests that for unemployed people a change in occupation is likely to have a negative impact on future wage growth while for employed people an occupational change is more often associated with better prospects for wage growth. Therefore occupational change is more likely to be an opportunity for employed job seekers, but a constraint for unemployed job seekers.

Previous studies suggest that employed and unemployed job seekers have different individual characteristics and employment histories, have different probabilities of finding a job, and find jobs of different quality. Our results suggest that they also exhibit different patterns of occupational change and tend to move in different directions in the occupational hierarchy. Since employed and unemployed job seekers start from different occupations and move in different directions, we can conclude that they tend to accept different types of jobs. All this adds evidence suggesting that employed and unemployed job seekers operate in different labour markets.

Although it has been suggested that job seekers might be more likely to find a better job if they quit their current job (i.e. become unemployed) and focus their efforts on their search for new employment, our results suggest otherwise. Since on-the-job search yields better occupational outcomes than unemployed search, workers should try to avoid unemployment. The best strategy for unemployed job seekers therefore seems that of accepting the first job offer they receive and then engaging in on-the-job search, rather than waiting for a good job offer which, especially in periods of recession, might not materialise.

Seems to run counter to the job-seeking advice of former times.

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