Declining labor turnover and turbulence

Abstract

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 the possible sources of the decline using a simple search-and-matching model with two types of workers, experienced and inexperienced, where the former type faces a risk of skill loss during unemployment. The calibrated model suggests that a higher risk of skill loss during unemployment results in a lower job separation rate, because workers accept lower wages in exchange for job security. Various other potential hypotheses are also examined.