Low job mobility

It’s sometimes said that we live in times of unusual economic uncertainty, with new businesses disrupting old ones and robots threatening to take our jobs. Today’s labour market data seem to undermine such claims, as they show unusual stability in jobs.

My first chart shows one measure of this: inflows and outflows into and out of employment, as a percentage of total jobs. If we were seeing high rates of disruption, we’d expect to see lots of people lose their jobs either to robots or as their employers shrink under competition from new rivals, and lots of job creation as new businesses take on staff.

Which is what we’re not seeing. Outflows from employment in particular are lower than they were before the crisis.

My second chart shows moves from job to job: because the data aren’t adjusted for seasonal swings, the orange line shows a four-quarter moving average. This shows that whilst such moves have risen sharply since the recession, they too are below the levels we saw in the early 00s.

What we have here is evidence that the pace of creative destruction is lower now than it was pre-crisis. I suspect this is closely linked to the fact that productivity growth has been sluggish for years. This is partly because labour mobility should improve productivity by ensuring that round pegs go into round holes – that workers are well-matched to jobs. But it’s also because a lot of productivity growth comes not from existing firms upping their game but from (pdf) entry and exit. Low rates of labour mobility are a sign that entry and exit is low.

All this is a two-edged sword. The good news is that it suggests that job security has risen. This is consistent with the fact that we’ve seen strong consumer borrowing and spending in recent years.

The bad news isn’t simply that it is also a sign of weak productivity. As the Resolution Foundation has said (pdf), low mobility “may have concerning implications for young people’s career prospects.” This is because:

Job mobility is generally a key enabler of pay progression and career advancement, and this is particularly the case for young people as they build careers, find roles in which their productivity will rise, and make progress up the earnings curve may have concerning implications for young people’s career prospects.

This might have nasty political implications. Saliha Metinsoy says declining job mobility in the US contributed to Trump’s victory because it increased people’s frustration with their lack of job prospects.

All this poses big and serious questions: what, if anything, can be done to foster greater creative destruction? How can we achieve the upsides of a fluid labour market – productivity growth and better prospects for younger workers – whilst avoiding the downside of insecurity? (Hint: citizens income). I don’t, however, expect politicians to have good answers to these.

Comments

[Dave Timoney]

Does this mean we can now start referring to older workers as job-blockers?

[Almar]

I think that to make the case, you need to separate voluntary outflows (quits) from involuntary (sacking/redundancies). If people are worried about their prospects of finding a better paying or more secure job, they will not even quit their job unless they are sure that they definitely have a better one lined up.

[reason]

I'm running a campaign, please stop using the term "creative destruction" - use "destructive creation" instead. Cars didn't need to get rid of all the horses before they could take over the road - the cars drove the horses out.

[jonny bakho]

I agree with Almar about voluntary vs involuntary outflows
Do people commonly lose their job to robots? Or do companies that automate move existing workers to other tasks and hire fewer people?

What I see in manufacturing business is a slow erosion due to automation that is reflected in less hiring as tasks are automated. The Big outflows occur when big facilities close which cause far more disruption

[chris]

@ Almar - those data are in the link. They show that redundancies/dismissals are below mid-00s levels, whilst resignations are slightly higher. I think this is consistent with there being overall slightly more job security now than then.