Dual labor markets in US – The decline in fluidity

Many people have assumed that most of the change has been happening within companies, as certain employees get disproportionately bigger paychecks. But a new study of U.S. incomes since the 1970s shows that most of the rise in inequality has been due to a greater spread in average earnings across companies. The researchers — Erling Barth of the Institute for Social Research, Alex Bryson of the National Institute of Economic and Social Research, James Davis of the Boston Census Research Data Center, and Richard Freeman of the National Bureau of Economic Research — attribute two-thirds to nine-tenths of the change to increasing inequality from workplace to workplace.

This growing gap may also help explain a decline in labor market fluidity in recent years. The share of Americans who move across state boundaries for employment has been falling since even before the recession, leading to a drop-off in geographical mobility for people of working age.

In an important paper presented at the Federal Reserve conference last month in Jackson Hole, Wyoming, Steven Davis of the University of Chicago and John Haltiwanger of the University of Maryland showed that taken together, U.S. job creation and job destruction rates are just two-thirds as high as their 1991 peak. Other labor-market indicators also suggest that there is substantially less fluidity today than there has been historically and that the decline started well before the recent recession.

via Inequality Starts With Your Employer – Bloomberg View.