Wage and Job Dynamics after Welfare Reform: The Importance of Job Skills

Abstract

I use data from employers and longitudinal data from former/current recipients covering the period 1997 to early 2004 to analyze the relationship between job skills, job changes, and the evolution of wages. I analyze the effects of job skill requirements on starting wages, on-the-job training opportunities, wage growth prospects, and job turnover. The results show that jobs of different skill requirements differ in their prospects for earnings growth, independent of the workers who fill these jobs. Furthermore, these differences in wage growth opportunities across jobs are important determinants of workers’ quit propensities (explicitly controlling for unobserved worker heterogeneity). The determinants and consequences of job dynamics are investigated. The results using a multiplicity of methods, including the estimation of a multinomial endogenous switching model of wage growth, show that job changes, continuity of work involvement, and the use of cognitive skills are all critical components of the content of work experience that leads to upward mobility. The results underscore the sensitivity of recipients’ job transition patterns to changes in labor market demand conditions.

Citation

Johnson, R.C. (2007), "Wage and Job Dynamics after Welfare Reform: The Importance of Job Skills", Polachek, S.W. and Bargain, O. (Ed.) Aspects of Worker Well-Being (Research in Labor Economics, Vol. 26), Emerald Group Publishing Limited, Leeds, pp. 231-298. https://doi.org/10.1016/S0147-9121(06)26007-2