Declining Labor Turnover and Turbulence

Posted: 8 Aug 2015

See all articles by Shigeru Fujita

Shigeru Fujita

Federal Reserve Bank of Philadelphia

Multiple version iconThere are 4 versions of this paper

Date Written: July 2015

Abstract

The purpose of this paper is to identify possible sources of the secular decline in the job separation rate over the past four decades. I use 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 separation rate. The key mechanism is that the experienced workers accept lower wages in exchange for keeping their jobs.

Keywords: Separation Rate, Wage Loss, Turbulence

JEL Classification: E24, J31, J64

Suggested Citation

Fujita, Shigeru, Declining Labor Turnover and Turbulence (July 2015). FRB of Philadelphia Working Paper No. 15-29, Available at SSRN: https://ssrn.com/abstract=2640920 or http://dx.doi.org/10.2139/ssrn.2640920

Shigeru Fujita (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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