Fewer workers choose to move to new pastures
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By covered wagon and jetliner, from East Coast to West, Rust Belt to Sun Belt, Americans’ propensity to be on the move – to new jobs and new places – has historically provided the economy with a critical dose of oomph.
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But as fewer and fewer Americans are loading up the moving van in search of opportunity, that advantage may be slipping away. In recent years, economists have become increasingly worried that a slide in job turnover and relocation rates is undermining the economy’s dynamism, damping productivity and wages while making it more difficult for sidelined workers to find their way back into the labor force.
“It’s possible that one reason people aren’t changing jobs is because they’ve all found jobs that are great for them and they’re happy,” Betsey Stevenson, an economist at the University of Michigan and a former member of President Obama’s Council of Economic Advisers, said. “But the other possibility is that people stay in jobs that aren’t as good for them because they’re terrified of changing, and that’s bad for the overall economy.”
Staying put can mean that workers are not moving to jobs where they would be more productive. At the same time, many are forgoing the raises and step-up on the career ladder that often come with a job switch. Fewer openings can also have a ripple effect, shrinking the bargaining power of workers in general, making it tougher to ask for a bump up in pay.
“It also stinks if you lose your job,” Ms. Stevenson said of reduced turnover. “It’s like a game of musical chairs where only half the people get up.”
The declining churn in the labor market may surprise those who assumed that the era of lifelong employment capped by a gold watch had given way to serial job-hopping. But the reality is more complicated, said Abigail Wozniak, an economist at the University of Notre Dame and one of the authors of a new report on the subject. While it is true that fewer people have very long tenures at a single company, she said, that trend has been swamped by a countervailing one: People are not moving as much out of what used to be entry-level and temporary jobs.
Such road-testing of jobs was once very common, particularly for young workers. But now, “quick turnover jobs are declining across the board,” Ms. Wozniak said. “It’s not as easy to try things out.”
A new analysis by Ms. Wozniak and economists at the Federal Reserve Board to be published soon by the Brookings Institution used a combination of factors — job shifts, movement in and out of the labor force, interstate migration, job creation and destruction, among others — to measure what they called fluidity or dynamism in the labor market.
What they found was a drop of 10 to 15 percent between 1980 and 2013. Some individual measures showed starker declines: The proportion of workers who jumped from one job to another plunged by nearly a quarter.
Mobility normally drops during downturns, and that was the case during the Great Recession. Millions of jobs vanished, and those fortunate enough to be working were less inclined to give up the one they had.
But even as much of the wreckage wrought by the crash has been cleared, fluidity has not bounced back to prerecession levels. Although there was a common perception that the mortgage crisis had stranded many Americans in place, economists found scant evidence to support that notion. Moving declined similarly among both renters and homeowners. Something else appears to be going on.
Moreover, when it comes to mobility, figuring out which is the chicken and which is the egg is not so easy. Is a less fluid labor market causing the economy to be more sluggish or is a sluggish economy causing the labor market to be less fluid?
Certainly, movement has declined as the population ages. Older people are less likely to switch jobs and resettle than younger people. The addition of career-minded women into the work force may also make it harder for couples and families to move if only one spouse can find a new job. In addition, fewer new companies are being created over all, and the ones that exist are growing more slowly on average.
Still, those explanations don’t account for the steep drops in mobility and job turnover found across every age group, educational level and industry.
One of the more intriguing findings was the role of declining social trust and what is known as social capital — the web of family, friends and professional contacts. For example, the proportion of people who agree with the statement, “Most people can be trusted,” has been shrinking for more than three decades. Researchers found that states with larger declines in social trust also had larger declines in labor market fluidity. The lack of trust may increase the cost of job-hunting and make both employees and employers more risk-averse.
Ms. Wozniak added that the benefits of LinkedIn and Facebook friends may not replace the personal connections that still remain the best way to find a job.
For some, the information revolution has a decided downside. Employers can use easily accessible information about criminal records and credit histories, not to mention embarrassing tweets, photos, social media postings and more to screen out a wider range of candidates.
“The cost of conducting these kinds of checks has declined,” said Steven J. Davis, an economist at the University of Chicago Booth School of Business, who has separately researched fluidity. Employers may like it because it helps them more efficiently screen candidates, but it also can make it harder for some potential workers.
“You get fewer second chances now,” Mr. Davis said. “If you screwed up in a way that’s out there, it follows you around for life.”
That can particularly hurt young black men, he said, who have disproportionate contact with the criminal justice system. (Offering a second chance is why President Obama recently proposed barring federal agencies from asking applicants for many jobs about their criminal histories until the end of the process.)
Mr. Davis also argued that increased government regulation, including varying licensing requirements that prevent workers from setting up shop in another state, have made the labor market more static, though the evidence is mixed.
Fluidity rates varied widely throughout the country, but the Brookings paper found that they declined in every state. Most of the largest drops occurred in the West: Oregon, Wyoming, Washington, Oregon, South Dakota, Montana, Idaho and Alaska were all in the bottom 10.
States with the most activity included North Carolina, South Carolina, New York, New Jersey and Illinois – but even these were not as fluid as they used to be.
Of course, high rates of job turnover are not necessarily good. Some states have tumult in the labor market because thousands of workers lost manufacturing, clerical or construction jobs. They might have found new positions at lower levels that don’t pay as much.
On the flip side, rootedness can also have other types of payoffs, including stronger communities and support, help with a babysitting emergency, a shared beer after work or a loan when a job is lost. As social trust diminishes, people may feel more comfortable sticking closer to home where the faces are familiar even if job opportunities are scarcer, researchers suggested.
Over all, “I don’t think anyone has a good answer yet” to the decline in mobility, Ms. Stevenson of the University of Michigan said. “It’s a puzzle and it’s the one I wish politicians and policy makers were more concerned about.”
Fewer workers choose to move to new pastures