Occupational Change, Employer Change, and the Transferability of Skills

Abstract

The individual propensity to change occupations has been little analyzed by economists, despite its important implications for income growth and market adjustment. Individual income growth is commonly associated with one form of occupational change, that of upward occupational mobility. Several examples of upward mobility sequences are: technician to engineer to manager; receptionist to secretary to administrative assistant; laborer to operative to craft worker. Changes in these directions are likely to be accompanied by income growth, and conversely, downward occupational mobility would decrease income. The implicit cause of the income growth associated with upward mobility is the increase in the individual's skills and the return to those skills. In other words, each of the sequences listed above appears to represent a discontinuous sequence of investments in occupational skills. The resulting life cycle profile of investment and income growth is discontinuous and concave. Similar life cycle profiles would characterize an individual's change of employer or region. Yet, these latter two types of mobility have received much more attention by economists than has occupational change.' This paper attempts to address this gap, by developing a human capital investment model describing the direction and timing of occupational change. To place the research described below in perspective, one must first ask why there has been so little analysis of occupational change. Sociologists have long been interested in occupational mobility, analyzing it as a means of upward income mobility. Yet economists have focused on models of occupational choice, disregarding occupational change over the life cycle [4; 15]. These models of occupational choice rely most heavily on the effects of formal schooling, thus disregarding the majority of the labor force for whom formal schooling is not a major determinant of either occupational choice or subsequent occupational change. Two factors may have contributed to the lack of interest in occupational change. First, the analysis of occupational change has relatively little direct policy relevance, as compared to the analysis of labor institutions, for example. Occupational change was last examined in