Tuesday, April 24, 2018

The Differences in Wage Growth Premiums from Changing Jobs During Different Phases of the Business Cycle

John Robertson, a senior policy adviser in the Atlanta Fed's research department, reports:
The wage growth of job-switchers tends to be a better cyclical indicator than overall wage growth. In particular, the median wage growth of people who change industry or occupation tends to rise more rapidly as the labor market tightens. To illustrate, the orange line in the [above] chart shows the median 12-month wage growth for workers in the Wage Growth Tracker data who change industry (across manufacturing, construction, retail, etc.), and the green line depicts the wage growth of those who remained in the same industry.

As the chart indicates, changing industry when unemployment is high tends to result in a wage growth penalty relative to those who remain employed in the same industry. But when the unemployment rate is low, voluntary quits rise and workers who change industries tend to experience higher wage growth than those who stay.

Currently, the wage growth premium associated with switching employment to a different industry is around 1.5 percentage points and growing.
The empirical difference in the premium during a boom and what Robertson call's a wage "penalty" during the bust phase of the business cycle can best be understood as the different factors that impact on job opportunities during different phases of the boom-bust cycle. Something I first discussed in 2008 when responding to a Paul Krugman confusion. .

-Robert Wenzel  

No comments:

Post a Comment