Job Mobility and Wealth Inequality

J. M. Applegate, Marco A. Janssen

Research output: Contribution to journalArticlepeer-review

Abstract

The extent to which employees change jobs, known as the job mobility rate, has been steadily declining in the US for decades. This decline is understood to have a negative impact on both productivity and wages, and econometric studies fail to support any single cause brought forward. This decline coincides with decreases in household savings, increases in household debt and wage stagnation. We propose that the decline could be the consequence of a complex interaction between mobility, savings, wages and debt, such that if changing jobs incurs costs which are paid out of savings, or incurs debt in the absence of sufficient savings, a negative feedback loop is generated. People are further restricted in making moves by their debt obligations and inability to save, which in turn depresses wages further. To explore this hypothesis, we developed a stylized model in which agents chose their employment situation based on their opportunities and preferences for work and where there are costs to changing jobs and the possibility of borrowing to meet those costs. We indeed found evidence of a negative feedback loop involving changes, wages, savings and debt, as well as evidence that this dynamic results in a level of wealth inequality on the same scale as we see today in the US.

Original languageEnglish (US)
JournalComputational Economics
DOIs
StateAccepted/In press - 2020

Keywords

  • Emergence
  • Firm productivity
  • Household debt
  • Inequality
  • Job mobility
  • Wages

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Computer Science Applications

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