An Analysis of Job Mobility and Earnings in New Zealand

Abstract

The movement of workers between jobs may play an important role in determining both the average level and overall dispersion in earnings in an economy. Yet, there has been almost no research to date on the extent and nature of job mobility and its possible consequences for individual earnings in New Zealand. This study provides some initial empirical results on this topic using administrative data provided by Statistics New Zealand (Linked Employee-Employer Data). We find that job mobility is extensive, but that high rates of job separation during the first year or two in a job eventually dissipate with tenure. Job mobility is generally higher among teenagers and young adults, but differences by gender are minimal. In fact, overall job mobility is generally higher for men than women. Individuals changing jobs receive monthly earnings that are, on average, below the earnings received by individuals who do not change jobs/ We find that job changes are associated with a narrowing in this earnings gap. However, this result disappears once we control for a wide variety of other determinants of earnings growth, Firm characteristics appear to play important roles in the relationship between job mobility and earnings. A move to a larger firm (i.e one with more employees) and a firm that pays higher average earnings to all its employees can result in a substantial increase in individual earnings. Earnings growth is also found to be negatively related to the time interval between jobs, and the initial earnings of the individual. Once we hold these individual and firm characteristics constant, however, job changes by themselves lead to a relative decline in earnings growth.