Promotion vs Resignation: Who Earns a Higher Salary?

A promotion at work is usually a good thing. It’s recognition by your employer that you’re doing a good job, and even better, it comes with more money. Sometimes, however, the best option is to quit.

It might run counter to common sense, but new research from MIT Sloan reveals that hiring from within may not be beneficial for some low-wage employees.

Faculty members Nathan Wilmers and William Kimball examined employment change both internally within companies and between employers between 1995 and 2019. What they found was that workers in the 25% lowest paid occupations who got promoted earned 7% less than workers with the same salary. group that changed companies.

“People who are starting out in these low-paying professions tend not to be in companies that hire internally,” Wilmers told MIT Magazine. “They tend not to be in environments where they have access to upward mobility within a company, which is why they have to switch companies entirely to advance.”

For people in the top 25% at companies, however, a promotion is often the way to go. The study found that these workers earned 6% more when moving internally compared to a new company (this also doesn’t take into account non-tangible items such as vacations and personal days).

The study may also have highlighted some of the reasoning behind the persistent problem of turnover in the service industry. People who are in low-wage organizations are less likely to be promoted because they compete with so many other people for a small number of jobs (for example, there may only be one or two managers in a restaurant or service business, with many people hoping to take that step). With little chance of advancement, a move to another company may seem like the best option.

“Low-paid workers [are] isolated in industries with few well-paying jobs to transfer to,” the study said. “Moving jobs to an employer dominated by low-skilled positions offers fewer opportunities than moving to an employer with many high-paying jobs.

According to the authors of the study, one way to retain these workers is to add value to these jobs, by teaching new skills or giving employees more freedom to decide how to handle various situations. Looking at them only as “starter jobs” that people will leave quickly can make it a self-fulfilling policy.

Upskilling is a way for both employees to potentially earn more via promotions than having to start a new job search, as well as reducing attrition for companies and creating more valuable staff. who can adapt to upcoming changes in the workplace.

This could be a huge advantage. Last year, a Fortune/Deloitte survey asked CEOs what external issues could impact their business. The main response was not the pandemic, it was a shortage of labor and skills. And 60% of HR leaders told Gartner that developing essential skills and competencies was their top priority this year.

“The concept of work as a whole is changing rapidly,” found a pilot study by the World Economic Forum earlier this year. “And the upheaval caused by the COVID-19 pandemic has further crystallized an urgent and complex global employment challenge: how to prepare people for the future of work in ways that serve individuals, businesses and communities. “

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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