Study: US workers are staying put more than ever. And government is making the problem worse

From James Pethokoukis of AEI.

"A deep, dynamic, fluid, flexible labor market is supposed to be one of America’s economic strengths and competitive advantages. Jobs are created, jobs are destroyed as a changing market demands. Workers come and go, always looking for better-paying, more-fulfilling gig. But that process is breaking down. From the Jackson Hole conference, “Labor Market Fluidity and Economic Performance” by Steven J. Davis and John Haltiwanger:

1.) The U.S. economy experienced large, broad-based declines in labor market fluidity in recent decades. Declines in job and worker reallocation rates hold across states, industries, and demographic groups defined by gender, education and age. Fluidity declines are large for most groups, and they are enormous for younger and less educated workers.
2.) Many factors contributed to reduced fluidity: a shift to older firms and establishments, an aging workforce, the transformation of business models and supply chains (as in the retail sector), the impact of the information revolution on hiring practices, and several policy-related developments. Occupational labor supply restrictions, exceptions to the employment-at-will doctrine, the establishment of protected worker classes, minimum wage laws, and “job lock” associated with employer-provided health insurance are among the policy factors that suppress labor market fluidity.
3.) The loss of labor market fluidity suggests the U.S. economy became less dynamic and responsive in recent decades. … These developments raise concerns about productivity growth, which has close links to factor reallocation in prominent theories of innovation and growth and in many empirical studies. The high-tech sector’s sharp drop-off in business entry rates and in the incidence of fast-growing young firms after 2000 reinforces this concern. …  Our econometric evidence supports the hypothesis that reduced fluidity lowers employment rates, especially for younger and less educated workers.
4.) If our assessment of how labor market fluidity affects employment is approximately correct, then the U.S. economy faced serious impediments to high employment rates well before the Great Recession. Moreover, if our assessment is correct, the United States is unlikely to return to sustained high employment rates without restoring labor market fluidity.

Labor Market Fluidity and Economic Performance
by Steven J. Davis and John Haltiwanger

So, another piece of evidence that America’s economic problems did not start with the usual suspects: George W. Bush, Obamanomics, or the Great Recession. Yes, an aging workforce plays a role. So do big changes in the US retail sector where big-box retailers show less job churn than the smaller players they replaced. Technology has made it easier for employers to screen applicants, including access to criminal records, credit histories, media attention, and social networking activity.

And there is some upside here to having more stability. Job losses can lead to lower earnings and can have negative affects on mortality rates, family stability, and mental health. What’s more, the transformation of the US retailers has boosted productivity and consumer purchasing power.

On the downside, less labor dynamism “goes hand in hand with a slower arrival rate of new job opportunities” which “increases the risk of long jobless spells” and hampers the ability to “switch employers so as to move up a job ladder, change careers, or satisfy locational constraints.” When Americans are on the move, America is on the move. And right now, we aren’t — with evidence to suggest bad government policy shares a large chunk of the blame."