Occupational and Regional Mobility as Substitutes: A New Approach to Understanding Job Changes and Wage Inequality

Job mobility offers opportunities for workers to obtain wage increases, but the returns on job changes differ considerably. We argue that part of this inequality results from a trade-off between occupational and regional mobility. Both mobility types offer alternative strategies for improving one's labor market position; however, each type also has unique restrictions. The high costs of regional mobility can thus induce occupational changes, even though the resulting human-capital devaluation leads to lower wage increases. We use linked retrospective life-course data for Germany (ALWA-ADIAB) and apply competing risks models to show that restrictions on one type of mobility drive individuals toward the other type of mobility. Using fixed-effects regressions, we then show that regional mobility yields higher wage improvements than occupational mobility does. We argue that restrictions on both types of mobility thus not only determine which type of mobility is chosen, thereby helping explain differential careers, but also contribute to inequality in wage trajectories due to differential returns on job mobility. The trade-off has explanatory power for the inequality between certain actors with different sets of mobility restrictions, such as parents and non-parents or employees in jobs with different skill demands, and it may also contribute to our better understanding of broader patterns of inequality—for instance, that caused by between-nation differences in job mobility.