Labor Market Fluidity [...]

The new paper, part of the Brookings Papers on Economic Activity, starts by laying out the trends in fluidity. Labor market fluidity can mean a number of things, including the rate at which workers move into and out of unemployment, switch jobs, and move across state lines. Molloy and her co-authors create a composite measure that combines these kinds of fluidities and find that overall fluidity in the U.S. labor market has fallen between 10 percent and 15 percent since the early 1980s. But for some of the individual flows, the decline has been as large as one-third.Why has that happened? Let’s look first at demographics. The U.S. population has changed quite a bit since the early 1980s as more women have entered the labor market and the labor force has gotten older, among other trends. These demographic changes could be responsible for less fluidity as, for example, older workers are less likely to switch jobs. The authors find, however, that while demographics can explain a decent amount of the decline in fluidity, it can’t explain the “bulk of the decline.” A full accounting needs to look at other potential causes. (Source)

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