JOB MOBILITY AND EARNINGS OVER THE LIFE CYCLE: Introduction 3

28522151-stock_chart_screen.600x400
The major implications are:

1. The earnings profile is likely to be discontinuous across jobs. There are two reasons for the discontinuity in earnings: First, job mobility will likely result in wage gains if the job switch has been voluntary. These gains, in a sense, represent the returns to investment in job search. Secondly, the investment profile is likely to be discontinuous across jobs. The basic reason for this discontinuity is that different jobs provide different learning options. Indeed, job turnover might be directly related to the search by individuals for investment opportunities different from the ones offered in the current job. A more subtle reason for the discontinuity is the fact that towards the end of the job, incentives for investment by both employers and employees are diminished as long as some specificity exists in the job training. In the beginning of the new job, at least once some brief trial period has elapses, the incentives for investment are likely to increase. In fact, holding the marginal cost of Investment constant across jobs, this would Imply not only a discontinuous Investment profile, but one that has an upward shift as well. comments

2. If Investment declines over the life cycle as the optimization models predict, two separate Implications for the Investment profile can be deduced when job mobility and specific training are Introduced Into the analysis. First, Investment will probably decline within the job. This decline Is more likely to hold for longer jobs, since at the beginning of the job, while the match Is being Investigated by both the Individual and the employer, Investment may Increase or remain constant (even at a zero level). A second Implication Is that the level of Investment In the job Is likely to be higher the earlier the job occurs. This prediction, too, must be qualified by the search for a proper match, which Is clearly most Intensive at the early phase of the working life.