Taking a leap: Do transitions among fields of employment pay off?
Mojca Svetek | 13 February 2024
People change their fields of employment for various reasons. These may include dissatisfaction with pay and benefits, lack of opportunities for advancement, person-job misfit, and more. The common theme here seems to be either finding work that suits one better or improving one’s position in the labour market.
Governments regularly allocate funds for retraining individuals for shortage occupations or occupations in high demand. So, employment advisors at public employment services may advice the unemployed to retrain for entirely new occupations. Usually, the premise behind transitions between occupations is the increased employability of the individual. But do transitions between occupations actually pay off?
Imagine a 45-year-old woman who wants to switch occupations. She is ready to invest time and effort and maybe even her own money in the retraining. As she now qualifies, she applies for a job in a new field in which she has no working experience. The question is, does she start that occupation at an entry-level like, say, a 25-year-old would? Does she start at the level 0 after investing 20 working years in a career in a different field?
Data on this topic is quite clear. Transitions among different occupations result in wage penalties for individuals in comparison to those that stay within an occupation. Even those who remain in the same occupation but switch firms (on average) experience some wage penalties. This highlights that the best outcomes are (on average) experienced by those who secure stable jobs and remain at the same firm.
Research suggests that lateral transitions hinder, rather than facilitate career prospects, especially if these transitions require substantially different skill sets. The negative effect is more pronounced in those in middle and later-stage careers and in those who are less-educated. Career changes are also stressful. Accumulated changes predict serious health risks such as cardio-vascular or psychological problems among others.
Going back to our 45-year-old. Will she suffer wage penalty due to changing her career? Quite likely. The size of this wage penalty, however, depends on the difference between the tasks performed in her previous occupation and those in her new occupation. This is, of course, assuming that her previous occupation required specific skills to begin with.
The take away is that lateral transitions do not guarantee better jobs or long-term outcomes. In fact, stable careers are associated with the best outcomes. However, if one desires or requires a career change, synergies between his or her previous occupation and new occupation should be sought.
Research articles:
Askenazy, P. (2018). The changing of the French labor market, 2000-2017. IZA World of Labor, no. 412.
Fasang, A. E., Geerdes, S., & Schömann, K. (2012). Which type of job mobility makes people happy? A comparative analysis of European welfare regimes. International Sociology, 27(3), 349-383.
Federighi, P. (2018). Non-linear paths in transitions through the labour market. Employability & Competences. Innovative Curricula for New Professions, 129-145.
Hamori, M., & Kakarika, M. (2009). External labor market strategy and career success: CEO careers in Europe and the United States. Human Resource Management: Published in Cooperation with the School of Business Administration, The University of Michigan and in alliance with the Society of Human Resources Management, 48(3), 355-378.
Hougaard, C. Ø., Nygaard, E., Holm, A. L., Thielen, K., & Diderichsen, F. (2017). Job mobility and health in the Danish workforce. Scandinavian journal of public health, 45(1), 57-63.
Joseph, D., Boh, W. F., Ang, S., & Slaughter, S. A. (2012). The career paths less (or more) traveled: A sequence analysis of IT career histories, mobility patterns, and career success. Mis Quarterly, 427-452.
Kim, Y. M. (2013). Diverging top and converging bottom: labour flexibilization and changes in career mobility in the USA. Work, employment and society, 27(5), 860-879.
Metcalfe, C., Smith, G. D., Sterne, J. A., Heslop, P., Macleod, J., & Hart, C. (2003). Frequent job change and associated health. Social science & medicine, 56(1), 1-15.
Nelissen, J., Forrier, A., & Verbruggen, M. (2017). Employee development and voluntary turnover: Testing the employability paradox. Human Resource Management Journal, 27(1), 152-168.
Schellenberg, C., Krauss, A., Hattich, A., & Hafeli, K. (2016). Occupational career patterns over 30 years: predictors and outcomes. Empirical Research in Vocational Education and Training, 8, no. 15.
Sullivan, S. E., & Al Ariss, A. (2021). Making sense of different perspectives on career transitions: A review and agenda for future research. Human Resource Management Review, 31(1), no. 100727.