Economic context
Research Summary

Tighter Labor Markets Boost Occupational Mobility for Workers in Low-Quality Jobs

Andrew BoardmanMay 03, 2023
Source: Federal Reserve Bank of Cleveland Title: Does Job Quality Affect Occupational Mobility? Author(s): Kyle Fee Original Publication Date: August 2022 Read Full Research Article

The Great Resignation became a household term this year as workers quit their jobs in historically high numbers, largely to switch into new jobs with better pay and other improved benefits. A recent research brief analyzing job upgrading trends between 2010 and 2021 suggests these moves are driven in large part by labor market tightness, or conditions of strengthening employer demand for workers. Job upgrading, facilitated by a tightening labor market, offers a powerful way to boost upward mobility and expand access to good jobs.

In this brief, Kyle Fee of the Federal Reserve Bank of Cleveland uses data from the American Community Survey and Current Population Survey to examine whether the period of gradually improving labor market conditions in the years following the Great Recession brought an increase in workers moving from low-quality jobs into occupations with better pay, hours, and benefits. Fee also explores occupational mobility trends in 2020 and 2021, offering a new lens on the Great Resignation and the recovery from the economic fallout of COVID-19.

The analysis shows that workers’ mobility out of low-quality jobs increased substantially from 2010 to 2019, contracted in 2020, and then rebounded to prepandemic rates in 2021 amid improving economic conditions and growing demand for workers.

The results suggest that tight labor markets play a powerful role in expanding economic opportunities for workers by enabling movement into occupations and industries with higher-quality jobs. They also underscore the importance of additional strategies to achieve broad-based job quality improvement and economic security.

Key findings

  • Workers in the lowest quality jobs—defined as the 25 percent of the workforce in occupations with the lowest pay, fewest benefits, and greatest prevalence of part-time work—receive an average hourly wage of $15.39, roughly half the workforce-wide average of $28.21. They are disproportionately Hispanic, Black, women, and people who do not have four-year college degrees and are most likely to work in industries including retail trade, accommodation and food services, and health care and social assistance.
  • In 2021, amid tightening labor market conditions, 4.8 percent of workers in low-quality jobs upgraded to occupations with better pay, hours, and benefits, up from 3.3 percent in 2010. The majority of workers in low-quality jobs remained in them or transitioned into other low-quality occupations.
  • Workers’ movement out of low-quality jobs and into better ones increased steadily between 2010 and 2019 as labor market conditions improved. A workers’ likelihood of occupational advancement was 28 percent higher in 2019 compared with 2010. Mobility slowed in 2020 but returned to prepandemic rates in 2021.
  • As job upgrading increased, the risk of unemployment declined—both trends driven by a strengthening labor market. Among workers in low-quality occupations, the likelihood of becoming unemployed fell by 60 percent between 2010 and 2019. The gap in unemployment likelihood between low-quality occupations and high-quality occupations narrowed over this period but remains substantial.
  • Among workers in low-quality jobs, movement into better occupations is most common for those working in the manufacturing and construction industries. Upward mobility rates are lowest in industries including accommodation and food services; arts, entertainment, and recreation; and private-sector education services. Due in part to variation in advancement rates by industry, men in low-quality jobs are 22 percent more likely than women to achieve occupational mobility, contributing to a gender gap in access to good jobs.

Policy and practice implications

Based on the study’s findings, WorkRise identifies the following implications for policy and practice.

  • Periods of labor market tightness are associated with gains in job upgrading for workers in occupations with low pay, insufficient hours, and few benefits. Policies targeting tight labor market conditions and full employment, including fiscal and monetary policy, can facilitate upward mobility and expand access to good jobs.
  • Even when labor markets are strong, most people working in low-quality jobs do not move into higher-quality occupations in a given year, and disparities in mobility opportunities exist by gender and industry. Additional policy measures can ensure that the benefits of tighter labor markets and improved job quality are evenly shared by aiming to break down barriers and frictions that hinder job-to-job mobility, reduce occupational segregation, improve job quality in industries with poorer working standards and limited advancement opportunities, and strengthen economic security programs such as unemployment insurance.
  • Improving job quality may help employers attract and retain employees during periods of tightening labor market conditions.
  • Employers in sectors with low rates of job quality and occupational mobility can adopt evidence-based approaches to improve working conditions and business performance.

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