The Career Ladder Is Breaking and Companies Helped Break It

For much of the twentieth century, the employment bargain was relatively straightforward. Workers joined a company, learned how it operated, accumulated skills and institutional knowledge, and often expected that strong performance would eventually lead to higher pay, promotions and greater security. Companies benefited because they retained employees who understood their systems, customers and culture, while workers benefited from believing loyalty would eventually be rewarded.

That bargain has weakened considerably. In January 2024, the median U.S. worker had been with the current employer for just 3.9 years, down from 4.6 years a decade earlier. The generational difference was even more striking: workers ages 25 to 34 had median tenure of just 2.7 years, compared with 9.6 years for workers ages 55 to 64. Younger employees are not literally spending one-third as much of an entire career with one company as baby boomers did, but the data clearly show that today’s younger workers move among employers much more frequently.

It is easy to interpret that mobility as a loyalty problem. Younger workers are often criticized for job hopping, refusing to pay their dues or treating employment as transactional. Yet employers have also spent decades changing the incentives. Companies increasingly hire experienced talent from outside, reduce formal training and use layoffs more readily as a normal management tool, teaching workers that staying loyal does not necessarily produce security or advancement.

The result is a labor market in which both sides increasingly behave rationally in ways that can make the overall system worse. Companies hesitate to invest heavily in employees who may leave, while workers hesitate to commit themselves to employers that may eliminate their jobs during the next restructuring. Each side’s response reinforces the other’s distrust.

Job Security Did Not Disappear, but Workers Learned Not to Depend on It

Older workers often remember an employment system in which long tenure was common enough to seem normal. That world was never universal, particularly for lower-wage employees, but large corporations were more likely to maintain internal labor markets in which people entered at lower levels, received company-specific training and advanced over many years.

The modern workforce is more fluid. BLS data show median tenure among workers 25 to 34 has remained below three years for roughly a decade, while workers in their late 50s and early 60s still average close to a decade with their current employer. Some of that difference is naturally explained by age because younger workers simply have had less time to remain anywhere, but it also reflects a labor market in which changing companies has become an ordinary way to build a career.

Layoffs have contributed to the change in expectations. Companies increasingly describe workforce reductions as routine responses to changing strategy, technology, demand or investor pressure. Employees consequently understand that strong individual performance does not guarantee that their position survives a merger, reorganization or cost-cutting program.

That changes worker behavior even before a layoff occurs. Someone who believes employment is conditional has a stronger incentive to maintain an external network, update a résumé and periodically test the market. Loyalty becomes less valuable when the employee is uncertain whether the employer intends to reciprocate it.

Companies Started Buying Skills Instead of Building Them

One of the largest structural changes in employment has been the decline of the company’s role as trainer. Historically, employers often hired workers who lacked every necessary skill and expected to teach much of what they needed after arrival. Increasingly, companies advertise for candidates who can perform almost immediately.

Evidence on the long-term decline in employer training is imperfect because consistent government data are scarce, but the available research points in the same direction. One review noted that young workers received roughly 2.5 weeks of training annually in 1979, while surveys by the mid-1990s found the average worker receiving fewer than 11 hours of formal training annually. A 2011 survey cited in the same research found that only 21% of U.S. employees reported receiving any employer-provided formal training during the previous five years.

More recent Brookings analysis similarly describes employer-paid training as having declined for years, including research finding a 28% drop in employer-paid training between 2001 and 2009. Brookings argues that greater worker mobility itself makes investment harder to justify because employers worry that employees will leave shortly after receiving expensive training.

That creates a circular problem. Companies train less because workers leave, while workers leave because companies provide fewer reasons to stay. The labor market gradually shifts from developing people internally to competing for workers who already possess the required skills.

Standardized Technology Made Workers More Portable

Technology helped accelerate that shift because many workplace skills became more standardized. Accounting systems, customer-relationship platforms, design software, project-management tools and productivity suites are now used across entire industries rather than being unique to one employer.

A worker who knows Salesforce, Excel, Workday, SAP, Adobe or another widely used platform can carry that knowledge from one company to another. The employee therefore becomes less dependent on a particular organization for career development, while the employer can search the external market for someone already familiar with the tools it uses.

That portability is beneficial in many ways. Workers can leave poor managers more easily, companies can recruit specialized talent quickly and industries can spread knowledge faster. The downside is that employers have less incentive to invest in development when the skills they create can immediately be sold to a competitor.

Institutional knowledge remains much less portable. Understanding how decisions actually get made, which customers require special treatment and which internal relationships make projects succeed can take years to develop. Companies that focus too heavily on transferable credentials can underestimate the economic value of the knowledge sitting inside their own workforce.

External Hiring Often Costs More Than Internal Promotion

One of the strongest arguments against excessive external hiring is that it may not actually be cheaper. Research by Wharton professor Matthew Bidwell found that external hires received lower performance evaluations during their first two years than employees promoted internally into comparable jobs. They also had higher exit rates while being paid roughly 18% to 20% more.

That finding contradicts the idea that companies routinely choose outsiders because they offer a cheaper source of ready-made talent. External hiring can appear efficient because the employer avoids years of training and development, but the company pays for that convenience through higher compensation, onboarding costs and slower adaptation to the organization.

Bidwell’s work found that new external hires can require two or three years to catch up because job performance depends on more than the technical skills appearing on a résumé. Relationships, company-specific processes and institutional knowledge take time to build. The outsider may look more qualified during recruiting while remaining less effective during the period when the company expects an immediate return.

Internal promotion has weaknesses too. Companies can become insular if they never introduce outside experience, and some organizations genuinely lack employees ready to fill specialized roles. The mistake is assuming that external hiring is automatically more efficient simply because the candidate arrives with the right keywords.

Workers Have Learned That the Biggest Raise May Be Outside

The same system creates a powerful incentive for employees to leave. If companies are willing to pay significantly more to attract external candidates than they pay people already performing similar work internally, employees eventually recognize that the fastest path to higher compensation may be changing employers.

Bidwell’s research highlights the paradox clearly. External hires were often paid substantially more despite initially performing worse than employees promoted from within. From the worker’s perspective, that creates a rational conclusion: remaining loyal can preserve familiarity and security, but entering the external market may establish a higher price for the same labor.

Once enough employees behave that way, employers point to high turnover as justification for reducing training. Employees then see reduced development and become even more willing to leave. What appears to be a cultural problem among younger generations can actually be an equilibrium created by compensation and promotion practices.

The healthiest organizations break that cycle by providing meaningful internal mobility. Employees do not necessarily need lifetime employment, but they need evidence that staying can produce competitive compensation, new responsibilities and valuable skills. Without that evidence, asking for loyalty becomes little more than asking workers to accept a financial discount.

Job Insecurity Can Produce Effort—but It Can Also Destroy Productivity

Some managers deliberately use uncertainty as a motivational tool. Employees are reminded about financial pressure, competitive threats or the possibility of restructuring because leadership believes a certain amount of fear keeps people focused.

There is a narrow logic behind that approach. A worker worried about losing a job may temporarily work longer hours, respond faster and become more visible. Research reviews acknowledge that job insecurity can sometimes induce workers to increase effort in an attempt to demonstrate their value.

The broader evidence, however, suggests that persistent insecurity carries significant costs. An OECD review of dozens of studies found strong evidence that job stress and strain are associated with lower at-work productivity, while supportive environments and workplace rewards are associated with better productivity. The American Psychological Association’s 2025 Work in America survey found that 54% of U.S. workers said job insecurity had a significant effect on their stress, while workers experiencing uncertainty also reported emotional exhaustion, lower motivation and reduced energy.

That makes manufactured insecurity a questionable long-term management strategy. Fear can create a burst of activity, but employees who constantly expect layoffs are also more likely to protect themselves, search for other jobs and avoid taking risks that could make them visible if a project fails.

Layoffs Can Change the Behavior of the People Who Remain

A layoff does not affect only the people leaving. The employees who survive often receive a message about the value of institutional loyalty, particularly when high performers or long-tenured colleagues disappear along with weaker performers.

The immediate response can look positive because remaining workers absorb additional responsibilities and become intensely focused on proving their value. Over time, however, the same environment can weaken engagement and increase voluntary turnover. APA notes that employees who remain after workforce reductions can experience negative effects on culture, performance and engagement.

The financial logic of layoffs can still be compelling. A company facing a genuine collapse in demand cannot maintain staffing simply to preserve morale, and restructuring can be necessary when technology changes how work is performed. The problem begins when routine workforce cuts become a substitute for long-term workforce planning.

Employees notice when companies repeatedly hire aggressively during strong periods and fire aggressively during slow ones. Eventually, workers learn to treat their employers with the same short-term mindset.

Japan Shows a Different Version of the Same Problem

Japan is often presented as the opposite model because traditional Japanese employment has placed greater emphasis on long-term job security and made dismissals more difficult than in the United States. That system can create greater stability, but it also produces its own distortions when companies want employees to leave but prefer not to formally fire them.

Japanese companies have periodically been criticized for so-called oidashibeya, sometimes translated as banishment or expulsion rooms, in which unwanted employees are transferred into undesirable or meaningless assignments in hopes they will resign voluntarily. The practice reflects a labor culture in which directly terminating established employees can be more difficult both legally and socially.

That model should not be romanticized. Formal job security loses much of its value if an employer can make the job intolerable until the worker quits. At the same time, the contrast illustrates that every employment system creates tradeoffs between flexibility for companies and security for workers.

The American model places relatively more adjustment risk on employees through layoffs and easier termination. The traditional Japanese model places more constraints on employers, which can encourage retention but can also produce indirect methods of managing unwanted workers. Neither extreme eliminates the underlying tension between organizational flexibility and worker stability.

The Real Cost of Turnover Is Lost Institutional Knowledge

Companies can calculate recruiting fees, signing bonuses and onboarding expenses easily. The harder cost to quantify is the knowledge that leaves when an experienced employee walks out the door.

An employee who has spent seven years with a company often knows why particular decisions were made, how an important customer behaves, which historical mistakes should not be repeated and which colleague can solve a problem quickly. Much of that information never appears in a manual.

Replacing technical capability can therefore be much easier than replacing organizational effectiveness. This helps explain why external hires with impressive credentials can still initially underperform internal candidates. They know how to do the profession but do not yet know how to do it inside that specific institution.

High turnover can gradually convert institutional knowledge into a temporary commodity. Companies then respond by creating more processes and standardization, which makes employees more replaceable but can also remove some of the judgment that experienced workers provided.

Training Has Become Everyone’s Responsibility—and Nobody’s Responsibility

The modern labor market increasingly assumes workers will maintain their own employability. Employees take online courses, earn certifications, learn new software and build professional networks because waiting for an employer to manage career development can be risky.

That independence is empowering for people who have time and money to invest in themselves. It is much harder for lower-income workers who may lack either. Brookings has described a “low-skill equilibrium” in which workers have little ability to finance training while employers have little incentive to train people they expect to leave.

The economy can therefore produce the skills gap companies complain about while the companies themselves contribute to it. Employers ask for experienced applicants, refuse to hire people who need development and then discover that too few workers possess the exact combination of skills required.

Some businesses have responded with apprenticeships, tuition support and internal academies, effectively rebuilding portions of the old training model. Those programs can be expensive, but so is continuously paying a premium to recruit experienced talent from competitors.

Loyalty Still Has Value When It Is Reciprocated

The decline of lifetime employment does not mean long tenure has become irrational. Staying with one company can still provide deep expertise, stronger internal relationships, greater influence and access to promotions that outsiders cannot easily obtain.

Wharton research on managerial careers found that upward moves into roles with greater responsibility were more likely to occur through internal mobility, even though external moves could produce comparable pay increases. That suggests internal careers remain valuable when the company actually provides a ladder to climb.

The problem is that employees increasingly require evidence rather than promises. A company that promotes from within, trains workers and adjusts compensation competitively can still earn loyalty. One that freezes pay, recruits outsiders above internal employees and regularly restructures should expect workers to behave more transactionally.

Loyalty is not disappearing because younger employees suddenly developed weaker character. It is becoming conditional because the economic contract supporting it has become conditional.

Job Hopping Is Rational Until Everyone Does It

For an individual worker, changing jobs can be an effective strategy. A move can produce a larger raise, broader experience and faster exposure to new responsibilities. It can also protect someone from becoming too dependent on the compensation practices of one employer.

At the economy-wide level, constant movement carries costs. Companies lose institutional knowledge, external hires spend months learning new organizations and workers repeatedly rebuild relationships that took years to establish. Bidwell’s finding that outsiders initially perform worse shows why a labor market maximizing mobility does not necessarily maximize productivity.

The objective therefore should not be recreating an era in which employees remain with one employer regardless of opportunity. A healthier system gives people legitimate reasons to stay while preserving the ability to leave when those reasons disappear.

That requires companies to treat retention as something earned rather than assumed. Competitive pay, credible advancement, useful training and reasonable security cost money, but so does continuously replacing experienced employees.

The Old Employment Bargain Is Not Coming Back

The era in which a typical worker expected one company to provide decades of employment is unlikely to return. Technology evolves too quickly, industries restructure too frequently and workers themselves value mobility more than earlier generations often could.

The replacement does not have to be permanent insecurity. Employers can acknowledge that careers will involve multiple companies while still investing in workers during the years they are present. Training does not become worthless simply because an employee may eventually leave, particularly when better development itself improves retention.

Workers should respond similarly. Maintaining transferable skills and an external network is prudent, but constant job hopping simply because another employer offers a modest raise can sacrifice valuable institutional capital and strong working relationships. Career mobility should be a tool rather than an ideology.

The deeper problem is that companies and employees have spent years teaching each other not to trust the old bargain. Businesses reduced training and embraced external hiring because workers might leave, while workers began leaving because outside employers often rewarded them more than their existing ones.

The career ladder did not disappear because one generation stopped believing in loyalty. It weakened because both sides changed the economics underneath it. If companies want employees to stay longer, they may eventually have to rediscover something earlier employers understood instinctively: people are much more willing to build a career inside an organization when the organization is willing to build the employee along with it.