Understanding Declining Fluidity in the U.S. Labor Market

85 Pages Posted: 3 Mar 2016

See all articles by Raven Molloy

Raven Molloy

Board of Governors of the Federal Reserve System

Christopher L. Smith

Government of the United States of America - Division of Research and Statistics

Riccardo Trezzi

Board of Governors of the Federal Reserve System

Abigail Wozniak

University of Notre Dame; IZA Institute of Labor Economics

Date Written: 2016-03-02

Abstract

We document a clear downward trend in labor market fluidity that is common across a variety of measures of worker and job turnover. This trend dates to at least the early 1980s if not somewhat earlier. Next we pull together evidence on a variety of hypotheses that might explain this downward trend. It is only partly related to population demographics and is not due to the secular shift in industrial composition. Moreover, the decline in labor market fluidity seems unlikely to have been caused by an improvement in worker-firm matching, the formalization of hiring practices, or an increase in land use regulation or other regulations. Plausible avenues for further exploration include changes in the worker-firm relationship, particularly with regard to compensation adjustment; changes in firm characteristics such as firm size and age; and a decline in social trust, which may have increased the cost of job search or made both parties in the hiring process more risk averse.

Keywords: demographic trends, hires and separations, job creation and destruction, job turnover, labor market churn, labor market transitions, labor reallocation

JEL Classification: J11, J21, J30, J60, R23

Suggested Citation

Molloy, Raven and Smith, Christopher L. and Trezzi, Riccardo and Wozniak, Abigail, Understanding Declining Fluidity in the U.S. Labor Market (2016-03-02). FEDS Working Paper No. 2016-15. Available at SSRN: https://ssrn.com/abstract=2741559 or http://dx.doi.org/10.17016/FEDS.2016.015

Raven Molloy (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Christopher L. Smith

Government of the United States of America - Division of Research and Statistics ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Riccardo Trezzi

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Abigail Wozniak

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
70
Abstract Views
375
rank
329,124
PlumX Metrics