Job Lock - Impact

Impact

Job lock has two negative implications for society. One implication is that those who want to switch jobs prefer another job because there is a higher utility associated with it (e.g. better suits their skills and talents). However, if they are “stuck” at a job, the negative externality is that they are being inefficient workers and not as productive for the company and society. Workers are discouraged from switching to jobs where they are more efficient producers, and this immobility of labor resrouces leads to a lower level of overall productivity and national income. The second implication is that the high risk consumers are more likely to face job lock for fear of losing coverage for their routine medical expenditures (they know their expected value of health bills). Employers offer health insurance benefits to ensure that their workers are healthy and therefore, productive workers. However, since job lock is common in the high risk employees, employers are ultimately keeping the high risk employees as a part of their company.

When attempting to estimate how frequently job lock occurs, one must control for outside factors that may influence a worker's decision other than the risk of losing health care. Other factors can include initial wages and expected wage offers at new employment, other fringe benefits, experience, and job security.