Costs of Quitting a Job

Economic theory predicts that when the costs of quitting one’s job are relatively low, mobility is more likely. This observation underlines the analysis of the rise in quit rates during periods of prosperity, and the effects of mobility costs can be seen when looking at residential location and job turnover. Industries with high concentrations of employment in urban areas, where a worker’s change of employer does not necessarily require investing in a change of residence, appear to have higher rates of job turnover than industries concentrated in nonmetropolitan areas do.

 

Beyond the costs that can be associated with such measurable characteristics as age and residential location are those that are psychic in nature. These latter costs, though unobservable to the researcher, are very likely to differ widely across individuals. Some people adapt more quickly to new surroundings than others do, for example. Recent studies have found considerable heterogeneity among workers in their propensity to change jobs, with one study reporting that almost half of all permanent separations that took place over a three-year period involved a small number (13 percent) of workers who had three or more separations during the period (in contrast, 31 percent of workers had no separations at all during the period).

 

It is also possible that the costs of job changing by employees vary internationally. Data suggest that workers in the United States may well be more likely to change employers than workers elsewhere may be. Indeed, data confirm that, on average, American workers have been with their current employers fewer years than workers in most other developed countries, particularly workers in Europe and Japan, have been with theirs. It is not known why Americans are more mobile than most others are, but one possibility relates to the lower levels of company training received by American workers. Another possibility, however, is that the costs of mobility are lower in the United States (despite the fact that Japan and Europe are more densely populated and hence more urban). What would create these lower costs?

 

One hypothesis that has received at least some investigation is that housing policies in Europe and Japan increase the costs of residential, and therefore job, mobility, Germany, the United Kingdom, and Japan, for example, have controls on the rent increases that proprietors can charge to existing renters while tending to allow proprietors the freedom to negotiates any mutually agreeable rent on their initial lease with the renter. Thus, it is argued that renters who move typically face very large rent increases in these countries. Similarly, subsidized housing is much more common in these countries than in the United States, but since it is limited relative to the demand for it, those British, German, or Japanese workers fortunate enough to live in subsidized units are reluctant (it is argued) to give them up. The empirical evidence on the implications of housing policy for job mobility, however, is both limited and mixed.

 

It could also be hypothesized that the United States, Australia, and Canada, all of which exhibit shorter job tenures than do most European countries or Japan, are large, sparsely populated countries that historically have attracted people willing to emigrate from abroad or resettle internally over long distances. In a country of “movers,” moving may not be seen by either worker or employer as an unusual or especially traumatic event.

 

While questions remain about the causes of different job mobility rates across countries, the social desirability of job mobility can also be debated. On one hand, mobility can be seen as socially useful because it promotes both individual well-being and the quality of job matches. Moreover, the greater the number of workers and employers “in the market” at any given time, the more flexibility an economy has in making job matches that best adapt to a changing environment. Indeed, when focusing on this aspect of job mobility, economists have long worried whether economies have enough mobility. On the other hand, lower mobility costs (and therefore greater mobility) among workers may well serve to reduce the incentives of their employers to provide job training. Whether the presence of job changing costs is a social boon or bane, these costs and the mobility associated with them are factors with which all employers must contend.

 

【Paragraph 1】Economic theory predicts that when the costs of quitting one’s job are relatively low, mobility is more likely. This observation underlines the analysis of the rise in quit rates during periods of prosperity, and the effects of mobility costs can be seen when looking at residential location and job turnover. Industries with high concentrations of employment in urban areas, where a worker’s change of employer does not necessarily require investing in a change of residence, appear to have higher rates of job turnover than industries concentrated in nonmetropolitan areas do.

 

 

1. According to paragraph 1, people are more likely to quit their jobs in which TWO of the following situations? To receive credit, you must select TWO answers.

A. They are living in good economic times.

B. They are moving from urban areas to non-urban areas.

C. They are living in urban areas.

D. They do not like their employers.

 

 

2. Which of the sentences below best expresses the essential information in the highlighted sentence in the passage? Incorrect choices change the meaning in important ways or leave out essential information.

A. Workers in urban areas change jobs less frequently than do those in nonmetropolitan areas because the costs associated with a change of residence are higher in urban areas.

B. Industries located in urban areas experience higher rates of job turnover than do those in nonmetropolitan areas because workers can often change employers without having to change where they live.

C. Industries located in urban areas tend to have lower rates of job turnover than do those in nonmetropolitan areas because they are more likely to invest in residences for workers.

D. Workers in urban industries are likely to change jobs more frequently than are those in nonmetropolitan industries because it is less costly for workers to change residences in urban than in nonmetropolitan areas.

 

 

【Paragraph 2】Beyond the costs that can be associated with such measurable characteristics as age and residential location are those that are psychic in nature. These latter costs, though unobservable to the researcher, are very likely to differ widely across individuals. Some people adapt more quickly to new surroundings than others do, for example. Recent studies have found considerable heterogeneity among workers in their propensity to change jobs, with one study reporting that almost half of all permanent separations that took place over a three-year period involved a small number (13 percent) of workers who had three or more separations during the period (in contrast, 31 percent of workers had no separations at all during the period).

 

3. Why does the author note that “Some people adapt more quickly to new surroundings than others do”？

A. To argue that some people experience little psychic cost when they change jobs

B. To support the claim that the psychic cost of changing jobs is likely to differ widely between individuals

C. To illustrate why some psychic costs are unobservable to researchers

D. To argue that psychic costs alone cannot fully explain changes in mobility rates

 

【Paragraph 4】One hypothesis that has received at least some investigation is that housing policies in Europe and Japan increase the costs of residential, and therefore job, mobility, Germany, the United Kingdom, and Japan, for example, have controls on the rent increases that proprietors can charge to existing renters while tending to allow proprietors the freedom to negotiates any mutually agreeable rent on their initial lease with the renter. Thus, it is argued that renters who move typically face very large rent increases in these countries. Similarly, subsidized housing is much more common in these countries than in the United States, but since it is limited relative to the demand for it, those British, German, or Japanese workers fortunate enough to live in subsidized units are reluctant (it is argued) to give them up. The empirical evidence on the implications of housing policy for job mobility, however, is both limited and mixed.

 

4. According to paragraph 4, what may contribute to high mobility costs in Germany, the United Kingdom, and Japan?

A. Rent control does not apply to a renter’s first lease on a property.

B. Governments have significantly reduced housing subsidies.

C. There is little control on the rent increases that can be charged after the initial agreement.

D. When a renter leaves a housing unit that has been subsidized, the unit will not be subsidized for the next renter.

 

5. What is the author’s purpose in using the parenthetical phrases “it is argued” ？

A. To indicate that the view that workers are reluctant to leave subsidized housing is widely accepted

B. To suggest that the view that workers are reluctant to leave subsidized housing has not been proved true

C. To emphasize that the view that workers are reluctant to leave subsidized housing was based on careful reasoning

D. To oppose the view that workers are reluctant to leave subsidized housing

 

 

【Paragraph 5】It could also be hypothesized that the United States, Australia, and Canada, all of which exhibit shorter job tenures than do most European countries or Japan, are large, sparsely populated countries that historically have attracted people willing to emigrate from abroad or resettle internally over long distances. In a country of “movers,” moving may not be seen by either worker or employer as an unusual or especially traumatic event.

 

6. Paragraph 5 supports which of the following ideas about mobility costs for American workers compared with mobility costs for workers in most European countries?

A. Mobility costs are higher for American workers because they have shorter job tenures.

B. American workers get more help from employers in covering the costs of moving to a new job.

C. The psychic costs of resulting internally to take a job are lower for American workers

D. The economic costs of emigrating to take a job are higher for American workers

 

 

7. The word “traumatic” in the passage is closet in meaning to

A. important

B. unreasonable

C. expensive

D. upsetting

 

 

【Paragraph 6】While questions remain about the causes of different job mobility rates across countries, the social desirability of job mobility can also be debated. On one hand, mobility can be seen as socially useful because it promotes both individual well-being and the quality of job matches. Moreover, the greater the number of workers and employers “in the market” at any given time, the more flexibility an economy has in making job matches that best adapt to a changing environment. Indeed, when focusing on this aspect of job mobility, economists have long worried whether economies have enough mobility. On the other hand, lower mobility costs (and therefore greater mobility) among workers may well serve to reduce the incentives of their employers to provide job training. Whether the presence of job changing costs is a social boon or bane, these costs and the mobility associated with them are factors with which all employers must contend.

 

8. According to paragraph 6, high job mobility rates may benefit an economy by

A. making it more likely that the economic environment will change significantly

B. encouraging employers to increase the sizes of their workforces

C. making it more likely that jobs will be filled by people who are suited to them

D. encouraging workers to improve their skills

 

【Paragraph 6】While questions remain about the causes of different job mobility rates across countries, the social desirability of job mobility can also be debated. On one hand, mobility can be seen as socially useful because it promotes both individual well-being and the quality of job matches. ■ Moreover, the greater the number of workers and employers “in the market” at any given time, the more flexibility an economy has in making job matches that best adapt to a changing environment. ■Indeed, when focusing on this aspect of job mobility, economists have long worried whether economies have enough mobility. ■On the other hand, lower mobility costs (and therefore greater mobility) among workers may well serve to reduce the incentives of their employers to provide job training. ■Whether the presence of job changing costs is a social boon or bane, these costs and the mobility associated with them are factors with which all employers must contend.

 

9. Look at the four squares【■】that indicate where the following sentence could be added to the passage According to this view, greater mobility could result in a less skilled workforce.

Where would the sentence best fit?

 

 

10. 【Directions】An introductory sentence for a brief summary of the passage is provided below. Complete the summary by selected THREE answer choices that express the most important ideas in the passage. Some sentences do not belong in the summary because they express ideas that are not presented in the passage or are minor ideas in the passage. This question is worth 2 points.

 

According to economic theory, workers are more likely to change jobs when the associated costs are low.

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Answer Choices

A. Since job changes by a minority of workers can radically alter overall job mobility rates, job mobility rates tell us little about the mobility costs facing the average worker

B. Residential location and individual psychic factors could account for some differences in job mobility among workers

C. Economists argue strongly for job mobility despite the social and economic costs associated with it.

D. Outside of the United States, subsidized housing and controls on rent increases explain why there is less job mobility in urban areas than in nonmetropolitan areas.

E. Possibly due to housing and other differences, mobility costs may be lower in the United States than in most other developing nations, which could help account for differences in job mobility.

F. High job mobility arguably has both benefits, in terms of individual well-being and economic flexibility, and economic costs.

 

 

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