labor market fluidity and economic performance · 1. broad-based declines in u.s. labor market...
TRANSCRIPT
Labor Market Fluidity and Economic Performance
John HaltiwangerUniversity of Maryland & NBER
June 2015
This presentation is based on the paper “Labor Market Fluidity and Economic Performance” (co-authored with Steven Davis, University of Chicago). This work also draws on collaborative work with Ryan Decker, Henry Hyatt, Ron Jarmin, Erika McEntarfer and Javier Miranda.
Quarterly Rates of Worker Reallocation, Job Reallocation & Churn, U.S.Nonfarm Private Sector Annual Rates of Job Reallocation Across
Establishments, U.S. Nonfarm Private Sector
Worker Reallocation = Job Reallocation + Churn(Hires + Separations) (Creation + Destruction) 2
20.0
22.0
24.0
26.0
28.0
30.0
32.0
34.0
36.0
38.0
40.0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
JobReallocation
JobReallocation(Trend)
8.0
13.0
18.0
23.0
28.0
33.0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
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06
20
07
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09
20
10
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11
20
12
20
13
20
14
20
15
Worker Reallocation(H+S)
"Excess" Churning (H-JC=S-JD)
Job Reallocation (JC+JD)
3
Churn, Job Reallocation, Job-to-Job Flows and Worker Reallocation with Non-Employment All Closely Related
HHM: Haltiwanger, Hyatt and McEntarfer (2015)
• Churn and Job-to Job Flows arehighly correlated.• Job Reallocation and Worker Reallocation with Non-Employmentare highly correlated.
8.0
13.0
18.0
23.01
99
0
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
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05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Churn(JOLTS)
Job Reallocation (BED)
Job to Job Flows (HHM)
Worker Reallocation withNon-Emp (HHM)
4
Startup Rate in Nonfarm Private Sector, 1981-2012
Share of Employment for Young (<5) Firms, 1981-2012, Nonfarm Private Sector
0.06
0.07
0.08
0.09
0.1
0.11
0.12
0.13
0.14 Startup Rate
Exit Rate
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
Startup rate and share accounted for by young exhibits trend decline and also substantial declinesin Great Recession (without much post Great RecessionRecovery)
Source: Annual Rates, BDS
Source: Annual Shares, BDS
0
0.05
0.1
0.15
0.2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16+
Firm Age
High Exit Rates of Young Firms
0
0.05
0.1
0.15
0.2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16+
Firm Age
High Mean Net Growth of Surviving Young Firms
5
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16+
Firm Age
Distribution of Continuing Firm Growth Rates
Median 10th/90th Percentile
• Strong Up or Out Dynamics and HighDispersion/Skewness of Young Firm• Lower Young Firm Share impliesLower Job and Worker Reallocation
Source: Decker, Haltiwanger, Jarmin and Miranda (2014), LBD
6
10
15
20
25
30
35
40
45
Manufacturing
Retail
Information
FIRE
Services
Trends in the Pace of Job Reallocation by Selected Broad Sectors
• All sectors decline post 2000 but someincrease pre-2000 (notably Information sector).• Sectors with high reallocation rates like Services and Retail are also shares withrising employment shares .• From sectoral perspective, decline is due towithin sector declines (not composition effectswhich work in the wrong direction).
Source: Decker, Haltiwanger, Jarmin and Miranda (2015), LBD
There are some important differences in these trends across major industry sectors
7
0
5
10
15
20
25
30 Manufacturing
Retail
Information
FIRE
Services
Share of Employment at Young Firms (Less than 5) for Selected 2-digit NAICS Sectors
Retail and Services have largestand most pervasive declinesIn young-firm shares.
Young-firm share in Information rose through 2000 and declined thereafter.
Source: Decker, Haltiwanger, Jarmin and Miranda (2015), LBD
0.2
0.4
0.6
0.8
11
99
9
20
00
20
01
20
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Wo
rke
r R
eal
loca
tio
n R
ate
sWorker Reallocation Rates by Age Groups, Males
19-24
25-44
45-54
55-64
0.2
0.4
0.6
0.8
1
19
99
20
00
20
01
20
02
20
03
20
04
20
05
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12
Wo
rker
Rea
lloca
tio
n R
ates
Worker Reallocation Rates by Age Groups, Females
19-24
25-44
45-54
55-64
Quarterly Worker Reallocation Rates by Gender, Age and Schooling Attainment
0.2
0.3
0.4
0.5
0.6
19
99
20
00
20
01
20
02
20
03
20
04
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Wo
rker
Rea
lloca
tio
n R
ates
Worker Reallocation Rates by Education, Males
<High School
High School
Some College
College
0.2
0.3
0.4
0.5
0.6
19
99
20
00
20
01
20
02
20
03
20
04
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Wo
rker
Rea
lloca
tio
n R
ates
Worker Reallocation Rates by Education, Females
<High School
High School
Some College
College
8Source: QWI
Changes in Quarterly Job Reallocation, Churn and Worker Reallocation
Rates by State from 1999-01 to 2010-12, 30 States Covered by QWI
-40
-35
-30
-25
-20
-15
-10
-5
0
Ch
ange
(Lo
ng
Dif
fere
nce
)
Long Difference (Churn) Long Difference (Job Reallocation)
9
Why the Decline in Labor Market Fluidity?• Decline in entrepreneurship and shift to older firms.
• A shift to larger businesses played an important role in retail trade.
• Shifts in the industry distribution of employment go the “wrong” way.
• Taken together, shifts in the industry, age and size distribution of employment account for about 15% of the secular drop in job reallocation
• An aging workforce contributes to the decline in worker reallocation intensity – but aging played a modest role in the 2000s.
• Institutional and Regulatory Changes also may have suppressed labor market fluidity
10
Is Reduced Fluidity Cause for Concern?
1. Beneficial and benign aspects of reduced fluidity:A. Less job reallocation means fewer layoffs and smaller unemployment inflows.
B. Reduced fluidity is partly a by-product of developments that raised productivity and improved welfare: The shift away from small, independent stores to big box retailers (e.g., Wal-Mart) raised productivity, lowered prices, and increased product selection. It also brought lower rates of reallocation.
2. Reasons for concern:A. Reallocation plays a key role in prominent theories of innovation and growth.
B. Factor reallocation flows are an important source of medium-term productivity growth according to many empirical studies.
C. Fluidity facilitates job mobility, wage growth and career advancement.
D. Fluidity promotes high employment.
11
The Fluid Labor Markets HypothesisHypothesis: Fluid labor markets promote high employment.
Mechanisms:
1. Fluid Labor Markets:1. Increase incentives for Job Creation by firm.
2. Offer abundant opportunities to find a job
3. Increase the prospect of finding the “right” job to:1. Move up the job ladder
2. Satisfy locational constraints
4. The result is better opportunities and stronger incentives to accumulate market-relevant human capital, increasing earnings capacity and strengthening work attachment.
5. Reduce discouraged workers
6. Improve employer screening.
2. All of these effects especially relevant for marginal workers.12
Male Employment Rates by Age and Education for Selected Periods (CPS)
13
Female Employment Rates by Age and Education for Selected Periods (CPS)
14
Actual and Predicted Changes in Employment Rates Implied by Changes in Fluidity, 1998-00 to 2010-11, Males
15
-35
-30
-25
-20
-15
-10
-5
0
5
<25 25-34 35-54 55+
Age Group
Less than High School
Actual Predicted
-35
-30
-25
-20
-15
-10
-5
0
5
<25 25-34 35-54 55+
Age Group
High School
Actual "Predicted"
-35
-30
-25
-20
-15
-10
-5
0
5
<25 25-34 35-54 55+
Age Group
Some College
Actual Predicted
-35
-30
-25
-20
-15
-10
-5
0
5
25-34 35-54 55+
Age Group
College
Actual Predicted
Actual and Predicted Changes in Employment Rates Implied by Changes in Fluidity, 1998-00 to 2010-11, Females
16
-35
-25
-15
-5
5
<25 25-34 35-54 55+
Age Group
Less than High School
Actual Predicted
-35
-25
-15
-5
5
<25 25-34 35-54 55+
Age Group
High School
Actual "Predicted"
-35
-30
-25
-20
-15
-10
-5
0
5
<25 25-34 35-54 55+
Age Group
Some College
Actual Predicted
-35
-30
-25
-20
-15
-10
-5
0
5
25-34 35-54 55+
Age Group
College
Actual Predicted
17
0.5
0.7
0.9
1.1
19
81
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85
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Within Industry Dispersion in TFP over time in High Tech Mfg vs. All Mfg (3-year MA, 90-10)
High Tech Mfg
All Mfg
Source: Decker, Haltiwanger, Jarmin and Miranda (2015)
18
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
1980s 1990s 2000s
Marginal Response of Plant-Level Growth to TFP Shock in High Tech Manufacturing
Young Mature
Summary of Key Points1. Broad-based declines in U.S. labor market fluidity in recent decades
• Large declines for most demographic groups, huge for younger and less-educated
• Sharp drop in fluidity and entrepreneurial dynamism in high-tech since 2000
2. Why? Full story yet to be written, but multiple forces are at work:• Shift of activity to older firms and establishments (why is not well understood)
• Shift to larger firms and establishments in some sectors (e.g., Retail Trade)
• An aging workforce
• Policy developments that suppress fluidity (e.g., erosion of employment-at-will, expansion of occupational licensing)
3. Reasons for Concern:• Worker and job reallocation contribute to productivity and real wage growth
• Reduced fluidity negatively affects employment, especially for those with limited skills
4. Key Implication for U.S. economic outlook:• U.S. faced serious impediments to high employment before the Great Recession. A
return to sustained high employment unlikely without restoring labor market fluidity19