A Wall Street Journal article says One Explanation for Weak Wage Growth: Workers’ Reluctance to Switch Jobs.
From London to Washington to Sydney, policy makers are puzzling over why workers’ pay has been rising only slowly even though official unemployment is at its lowest levels in decades.
That is surprising because changing jobs is often lucrative. U.S. workers who switch jobs gain 4% more pay on average than those who stay put, according to recent research by Giuseppe Moscarini, a labor economist at Yale University.
It is a crucial issue for central banks as they figure out how much to cut interest rates to support their softening economies. One of their key economic models, the so-called Phillips curve, predicted inflation would rise as unemployment fell. That hasn’t happened lately. Inflation remains below central banks’ targets across developed economies.
“Central banks should pay more attention to job switching and what it reveals about people’s preferences for the jobs they have,” Mr. Moscarini says.
The argument runs like this: Workers can demand higher wages only if they have outside offers, regardless of the unemployment rate. People who switch jobs tend to find work that better utilizes their skills, and therefore pays more. Job switchers also improve the bargaining position of workers who stay in their jobs, by encouraging employers to pay more to retain them.
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