Job Lock

The term job lock is used to describe the inability of an employee to freely leave a job because doing so will result in the loss of employee benefits (usually health or retirement related). In a broader sense, job lock may describe the situation where an employee is being paid higher than scale or has accumulated significant benefits, so that changing jobs is not a realistic option as it would result in significantly lower pay, less vacation time, etc.

Benefits-related job lock is a concern in United States because the greatest source of insurance for most Americans is Employer Provided Health Insurance (EPHI). While EPHI offers several advantages over individually purchased health insurance, such as lower premiums and informed purchasing, it has a major disadvantage in that the employees cannot take their EPHI to their next place of employment. The nonportability of EPHI is what causes workers to get locked into their present jobs, hence the term job lock. Bridget Madrian argued in 1994 that the link between EPHI and labor market mobility was an important factor in evaluating several proposals to reform the US health care system. The study by Madrian (1994) estimated that job-lock reduced the voluntary turnover rate of those with EPHI by 25 percent.

Legislative efforts to address health-insurance related job lock in the US include the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Health Insurance Portability and Accountability Act of 1996.