As Job Flow Slows, Americans Get Stuck in Place

COMMENT

Most Americans believe that the job market has grown more turbulent, with people changing employers ever more often. In reality, the opposite is happening.

This, in turn, largely explains why fewer Americans than ever are moving across state lines. And as intergenerational income mobility also declines, U.S. families may be in for a new era of restricted opportunity.

Consider the evidence on job changes. After analyzing combined data from four employment surveys conducted from 1998 to 2010, Henry Hyatt and James Spletzer of the U.S. Census Bureau concluded that “rates of job creation, job destruction, hiring and separation declined dramatically, and the rate of job-to-job flows fell by about half.”

In 1998, various surveys suggested that 8 percent to 10 percent of American workers switched jobs. In 2010, just 5 percent to 6 percent did. This trend predated the last recession (although declines are always larger during recessions). And very little of it can be explained by shifts in the demographic makeup of the U.S.

Similarly, economists Steven Davis of the University of Chicago, Jason Faberman of the Federal Reserve Bank of Chicago and John Haltiwanger of the University of Maryland have found that from 1990 to 2010, the rate of job change gradually declined. As the authors note, their finding indicates that U.S. labor markets have become “less fluid and dynamic.”

Meanwhile, the interstate migration rate has shrunk to less than half its average from the late 1940s to the early 1970s, according to calculations by economists Raven Molloy and Christopher Smith of the Federal Reserve and Abigail Wozniak of the University of Notre Dame. They also found that changing demographics and the state of the housing market cannot explain much of the decline. (The authors did find, somewhat surprisingly, that interstate mobility rates have fallen more for renters than for homeowners, and also a bit more for college graduates than for others.)

Molloy, Smith and Wozniak convincingly tie these two trends together. They find that roughly three-quarters of people who move across state lines change employers when they do so. However, the wage gain from switching employers has fallen to essentially zero. The result, they argue, is that people change jobs less often and therefore have less incentive to move to another state. A key question, then — and one that I will explore in future columns — is why the wage gain from switching employers has declined.

Meanwhile, intergenerational income-mobility rates appear to also have dropped. That is, the chances that a middle-income child becomes a high-income adult, or a high-income child becomes middle-income, appear to be lower today than in the past. I will also explore this topic in future columns, but the important point for now is that the loss of intergenerational mobility points to a less dynamic society.

So we are left with a puzzle: Most Americans feel their lives are more fluid than in the past, while the data suggest otherwise. At least with regard to job changes, big moves and mobility across generations, America appears to be getting stuck in place.