Job-hoppers damaging their financial futures

Mar 20 2008 by Nic Paton Print This Article

It's normally assumed that switching jobs is the best way to fast-track your salary, but now new research has suggested that hopping jobs too often can actually end up damaging your pay prospects.

Research by an academic at the University of British Columbia has concluded that workers who frequently change jobs generally end up earning less than their more stable counterparts.

Sociologist Sylvia Fuller examined data from the 1979 National Longitudinal Survey of Youth, tracking nearly 6,000 workers during their first 12 years in the labour market.

Her findings, published in the American Sociological Association's journal American Sociological Review, concluded that, by and large, any benefits from job mobility accrued in a worker's early career.

Mobility could be a wage asset when it was concentrated in the early years of employment and not coupled with layoffs, redundancies, employment gaps or family-related leave.

In this case, moderate or even high levels of mobility could lead to equal or better wage outcomes than stability, she argued.

But other than this, Fuller found that, generally, wage outcomes deteriorated as mobility rose.

Her findings could have significant consequences for the many U.S workers who assume that job hopping is the easiest way to boost their pay cheque.

Short-term job hopping is becoming an increasing common phenomenon in all sectors of the American economy.

A survey in March last year by Boston-based consulting firm, Novations Group, for example revealed that a third of employers experienced turnover of between 10 and 25 per cent.

For a further one in 10 organisations first-year departures approached a staggering 50 per cent.

Similar research by Sirota Survey Intelligence in late 2006 found that employees with less than two years of service voluntarily left at an average rate of about 20 per cent per year, while those with more than two years tenure quit at an average rate of only half this.

Yet, echoing some of the concerns raised by Fuller, a poll at the same time by recruiter Robert Half Finance & Accounting concluded that serial job hoppers could find themselves bounced out of consideration for future opportunities.

"The past 30 years have seen the erosion of long-term employment, and young people are increasingly told to expect ongoing employer changes throughout their careers," pointed out Fuller in the latest research.

"However, this research examines the cumulative changes workers make, or are forced to make, and demonstrates that these career moves may not always result in higher earnings," she added.

One reason for lower wage trajectories among high-mobility workers was their failure to accumulate valuable early tenure associated with staying up to five years with an employer, Fuller argued.

In the first five years of a job, each year of tenure was associated with approximately 2.4 per cent higher wages for men and 2.9 per cent higher wages for women.

However, after five years with an employer, women's gains from this tenure tended to plateau while men's began to erode.

Fuller also found that high-mobility workers tended to spend a greater proportion of time not employed and, all else being equal, a greater proportion of their job changes were the result of layoffs.

Men were laid off or discharged more frequently than women, yet they also left jobs for family reasons less often.

Regardless of gender differences, these reasons for job changes – layoffs, discharges and leave for family reasons – were all cause for lower wages because they tended to result in periods of unemployment.

There was also still a stigma attached to discharge or redundancy for both genders, and for family-related job separations for women.

A worker's family situation did not effect women alone. Married men and fathers experienced better wage outcomes when changing jobs than single men and those without children, Fuller concluded.

Married men were also penalised less for discharges than unmarried men, as were men with children relative to those without, although the difference in this latter case was small, she pointed out.

However, married men and those with children faced substantially higher wage penalties when being laid off for the first time.