Declining Labor Turnover and Turbulence

Fujita, Shigeru

doi:https://doi.org/10.21799/frbp.wp.2018.06

Working Paper

Declining Labor Turnover and Turbulence

Abstract: (supersedes WP 15-29)The rate of job loss has been on a secular decline for the last four decades or longer. Changes in demographics or industry composition do not account for the trend. This paper seeks to identify possible sources of this decline using a simple labor matching model with two types of workers, experienced and inexperienced, where the former type faces a risk of skill loss during unemployment. When the skill loss occurs, the worker is required to restart his career and thus suffers a drop in his wage. I show that a higher risk of skill loss results in a lower job separation rate, because workers are willing to accept lower wages in exchange for keeping their jobs. Various other potential hypotheses are also examined in the model.

Keywords: job loss rate; search and matching; turbulence;

JEL Classification: E24; E32; J64;

https://doi.org/https://doi.org/10.21799/frbp.wp.2018.06