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August 07, 2015

Job stability has risen over the past two decades, but at what cost for the young?

A new report by the Resolution FoundationA Steady Job? The UK’s Record on Labour Market Security and Stability since the Millennium—uses broad measures of job security and stability to understand developments over the past two decades and reveal how experiences have differed between men and women and across the generations.

The report finds that although job stability has risen, driven by more women returning to the same employer after taking maternity leave, and older people staying in work for longer, the rate at which people are moving between jobs—job mobility—has fallen. According to the report’s authors, this could “signal possible progression and promotion blockages in the labour market, which could hinder the career prospects of young people and risks permanently scarring their earnings.”

Workers often leave one employer to take a job at another, generally moving from less productive to more productive employers. Wages usually increase after such a job-to-job transition and employees generally stay longer at the subsequent job than at the previous job. Job-to-job transitions are more frequent for younger workers as they rely on these moves to build their careers.

Job-to-job movement for all workers was strong in 2000 when employment growth was rapid, but diminished in the mid-2000s as that growth slowed. The ensuing fall in 2008—the start of the global recession—was dramatic. The proportion of those in work moving to a new job fell from just under 3% of the workforce in each quarter to a little over 1.5%. Although the rate has again picked up, it is still nowhere near pre-recession levels.

In his article on the decline in job-to-job flows for IZA World of Labor, Henry R. Hyatt emphasizes that “A constant job-to-job flow rate requires a steady stream of jobs that are more productive than the ones that exist at a particular point in time, allowing employers to offer wages that induce workers to change jobs.” He concedes that “definitive evidence is lacking on why the flow rate has fallen to such unprecedentedly low levels.” And says that one reason is that “there are naturally no observations for potential matches that do not occur.” Therefore, “even the most detailed understanding of the causes and consequences of the decline in job-to-job flows will necessarily involve a great deal of uncertainty.”

What can be taken from the Resolution Foundation report is that the rise in job stability since the financial crisis in 2008 should not merely be considered a cause for celebration, as the drop in the rate at which people move between jobs is also likely to reduce the prospects for promotion, pay rises, and productivity gains, especially for the young.

Read more on the report in the Guardian here.

Whilst the Resolution Foundation report can be found here.

Related articles:
The decline in job-to-job flows, by Henry R. Hyatt