People who leave jobs without another one lined up may not realize what a disadvantaged position it puts them in, according to an analysis by the New York Federal Reserve posted on its Liberty Street Economics blog.
The Fed researchers looked at 426 people who participated in its Survey of Consumer Expectations in Oct. 2013. The 2013 survey had asked a range of questions about participants’ job status, expectations, and salary, across multiple industries. The researchers created categories based on whether those previously surveyed had moved from another job to their current position, or if they’d been unemployed for a spell first.
According to the findings, those who had switched from one job to another (roughly three-fourth of those surveyed) made substantially more money after their transition, even when comparing workers from similar demographics and industries. They started their current job at a better wage in the first place, and had received bigger raises during their time there. Here’s how salaries over their last two jobs compared for each type:
By contrast, those surveyed who took a new job after a period of unemployment generally saw little or no wage growth after switching. Those who switched from one job to another generally made significantly more in their next job, which can have a lasting knock-on effect.
Transitioning to a new job after being unemployed also led to lower job satisfaction, and an active search for new work. The previously unemployed were also substantially less likely to have benefits like healthcare and more likely to be doing contract or part-time work.
The researchers concluded that those surveyed who switched from job to job likely had the advantage of being choosey, leveraging their existing job to gain desired responsibilities and higher wages elsewhere. Those moving from one job to another also likely dodged the stigma employers associate with hiring someone who is unemployed.
Several jumps like this can lead to a sizable wage gap between those who move directly from job to job and those who don’t. In aggregate, the Fed researchers posited that a slowdown in job-to-job transitions can contribute to slower wage growth in the economy. So even as the unemployment rate has plummeted, wage growth has been extremely sluggish: