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Job Mobility, and Wage Dynamics

Statistics New Zealand LEED research paper

38 Pages Posted: 7 Jan 2010 Last revised: 15 Jan 2010

Dean Hyslop

Motu Economic and Public Policy Research

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Date Written: April 1, 2009

Abstract

Matched employer-employee data research has found that workers’ wages are affected by the characteristics of the firms they work in, and that higher skilled workers tend to be employed by higher paying firms. This paper examines the contribution of workers’ job mobility to their wage dynamics. We focus on the possible trade-off between moving to a better paying firm and losing a firm-tenure specific component of earnings, and examine what types of workers benefit from changing firms, rather than staying with their existing employer.

Our analysis provides four main findings. First, although the raw earnings gains to job movers and stayers are about the same, we find that, after controlling for observable differences, job-movers have about 1.3 percent lower annual earnings growth than nonmovers. Second, we estimate that job-movers gain 0.3 percent per year on average from moving to higher paying firms, but lose 1.6 percent in transitory earnings associated with changing jobs. The gains from moving to better firms are larger for both younger and new entrant workers, while the transitory earnings losses are smaller. We interpret these findings as being due to an earnings growth trade-off for workers between moving to a higher paying firm and losing their tenure-related earnings at their existing firm. Third, we estimate that, on average, workers gain (almost) all of the change in firm earnings premiums when they change jobs. However, such gains are not equally shared by all workers. In particular, our estimates suggest that it is the higher ability workers (as measured by the estimated worker earnings premiums) whose earnings gain (or lose) the most from moving to a firm with higher (or lower) earnings premiums. Finally, we find that workers’ earnings also benefit on average from a change in the average earnings of their co-workers. Controlling for other factors, we estimate that a 1 standard deviation change in the estimated average peer earnings is associated with about 0.25 percent change in a worker’s earnings on average.

Keywords: Job mobility, Wages, Wage dynamics, Earnings, Co-workers, Averages

JEL Classification: C01, J62, E24

Suggested Citation

Hyslop, Dean and Maré, David C., Job Mobility, and Wage Dynamics (April 1, 2009). Statistics New Zealand LEED research paper. Available at SSRN: https://ssrn.com/abstract=1532456 or http://dx.doi.org/10.2139/ssrn.1532456

Dean R. Hyslop (Contact Author)

Motu Economic and Public Policy Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

David C. Maré

Motu Economic and Public Policy Research Trust ( email )

PO Box 24390
Wellington, 6021
New Zealand
64-4-9394250 (Phone)

HOME PAGE: http://www.motu.org.nz

University of Waikato - Economics

New Zealand

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