Switching or staying? Exploring the dynamics and impacts of job switching in a wage setting cartel in Ethiopia

Abstract

The study examines the drivers of job switching and its effects on wages, and evaluates the effectiveness of a wage cartel in mediating job switching, thereby showing the paradox of switching, wage outcomes and cartel aims, in the context of Ethiopia’s light manufacturing. Main drivers of job switching are found to be social network density, experience, and initial skill grading status. Job switching leads to lower earnings compared to staying, as workers hopped in a wage cartel environment with limited wage variation. This wage effect is associated with the loss of seniority with the job change and the way the wage cartel system works. However, job switchers continue to change jobs, suggesting the firm’s cartel-based wage setting does not prevent labour turnover, but limits wage gains from job switching.