Inter-Firm Job Mobility for Wage Growth

In Simple Words

Imagine climbing a ladder where each rung is in a different building—to reach higher floors, a climber cannot stay on the same ladder forever; they must use their proven track record to jump to higher-paying rungs at new companies.

Research question

In developing urban economies, remaining in a single entry-level job rarely yields substantial wage growth, requiring young workers to navigate inter-firm job switches to secure higher pay.

Participants

N = 1,383 employed youth participants (aged 18–29) followed up 4 years post-treatment in Addis Ababa, Ethiopia.

Study Design

Longitudinal panel tracking job retention, inter-firm switches, and wage growth between 2015 and 2018 endlines.

Results

Only 13% of workers remained in the same job after 3 years; treated workers leveraged early job security and certified signals to switch firms successfully, sustaining a 20% wage premium over control workers (p < 0.05) without working longer current job tenures.

Takeaway

Encourage early career job mobility and credential portability so young workers can leverage market switches rather than relying solely on internal firm promotions.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Longitudinal study

A study that checks the same group of people at different times. This lets researchers examine how things change over time.

ExampleResearchers ask the same workers about their wellbeing at the start, after three months and after six months.

NICE · Longitudinal study ↗Read more about longitudinal study →

Related findings

• Ability-Heterogeneous Wage Returns →Labour & employment

  Imagine a nightclub with a strict dress code based on exam scores where high scorers enter easily without extra effort. For high-scoring individuals, additional work experience adds little value because employers already hire them based on test scores.

• Asymmetric Productivity-Wage Pass-Through and Signaling Bottlenecks →Labour & employment

  Imagine an artist creating valuable paintings inside a hidden room without a signature or portfolio to show outside art buyers. Because low-wage line workers cannot easily prove or signal their acquired soft skills to competing external employers, current factory owners face no market pressure to raise worker pay despite benefiting from major productivity jumps.

• Causal Wage Returns to Short-Term Work Experience →Labour & employment

  Gaining a brief period of formal work experience functions like a temporary structural bridge over a river. Even if the job lasts only a few days, it gives a worker immediate hands-on practice with real-world tasks and transferable skills, providing subsequent private employers with verifiable proof of workforce productivity beyond mere academic credentials.

• Frictionless Firm and Occupational Retention Stability →Labour & employment

  Imagine an employee who gets a financial windfall and decides to work fewer hours on Fridays, but keeps working at the exact same desk, for the same boss, in the same city, without switching careers or moving to a new company.