Lateral moves may ultimately benefit career trajectory, study
Most professional’s five-year and 10-year plans concerning how their careers develop inside firms focus on moving in a vertical fashion, that is, through promotions. The academic literature on the subject takes a similar approach.
However, looking at career trajectory from a different angle, Michael Waldman, professor of strategy and business economics at the Samuel Curtis Johnson Graduate School of Management, has found important links between lateral job moves in relation to promotions, wage dynamics, and education.
In the study “Lateral Moves, Promotions, and Task-Specific Human Capital,” he finds that, “workers who are laterally moved in one period are more likely to be subsequently promoted and experience larger wage growth compared with workers who are not laterally moved.”
Theorizing that higher-level positions employ various types of task-specific proficiencies by a professional, lateral moves are found to be useful for preparing workers for promotions later in their careers as such a move diversifies a worker’s skill set. Because of this, he concludes that promotions should be higher for workers who are laterally moved.
“The benefit of lateral moves therefore lies in the idea that upper level jobs use a wide but not necessarily deep set of skills, so a lateral move today will make the worker more productive in the future if the worker is promoted.”
In turn, such lateral career moves are associated with higher compensation growth, the study finds.
“The logic here is that there is an immediate cost associated with the move, so it is only beneficial when it contributes substantially to future productivity growth which translates into high future compensation growth,” Waldman said.
Further, the research finds that individuals with very high levels of education, 18 years and over, compared to those with lower levels are less likely to be laterally moved. This is due to the effect of education on the immediate cost of the lateral move. The finding adds to the existing academic discussion on the extent of formal education and learning-by-doing as substitutes in human capital development.
“Overall, our empirical investigation supports the idea that lateral moves are important for diversifying a worker’s stock of task-specific human capital which, in turn, serves to increase the worker’s productivity after the worker is subsequently promoted,” Waldman said.
The study was co-authored by Xin Jin, associate professor of economics at the University of South Florida, who graduated from Cornell in 2014 with a Ph.D. in economics.
Waldman is widely recognized as one of his field’s top researchers in the area of applied microeconomic theory, where his main fields of interest are industrial organization, labor economics, and organizational economics. In these areas, he is best known for his work on learning and signaling in labor markets, the operation of durable goods markets, and the strategic use of tying and bundling in product markets.
In addition to his work in industrial organization, labor economics, and organizational economics, Waldman has also conducted research on a diverse set of topics including the role of expectational shocks in business cycle fluctuations, the role of tied transfers in family and government decision making, how the theory of natural selection can explain systematic errors in decision making, and the ramifications of limitedly rational behavior for market outcomes. Among his various editorial positions, Waldman served as an editor at the Journal of Labor Economics, the premier journal in labor economics, from 2009-2019.
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