Posted: December 3rd, 2014

Labor Markets:

Labor Markets:

Project description
There is no page requirement, but the summary is expected to be thorough and provide some critical discussion of the ideas being presented in the article. It would be

difficult to provide a complete summary in less than two pages. Also, it is expected that the summary contains your reaction to the article, either within the summary

or with a short paragraph or two at the end.

The Flow Approach to Labor Markets:
New Data Sources and Micro–Macro
Links
Steven J. Davis, R. Jason Faberman and
John Haltiwanger
More than 10 percent of U.S. workers separate from their employers each
quarter. Some move directly to a new job with a different employer,
some become unemployed and some exit the labor force. The flow of
new hires is similarly large, and somewhat larger whenever aggregate employment
expands. The magnitude of hires and separations underscores the fluid character
of U.S. labor markets and draws attention to questions of search and matching,
recruiting, applicant screening and employee retention. It also provides powerful
motivation for theories of frictional unemployment.
The economic forces behind worker flows can be grouped into broad catego-
ries. On the “demand side,” employers create new jobs and destroy old ones in large
numbers every quarter. These newly created and destroyed jobs can be measured
directly, and they account for much of the job mobility and many of the jobless
spells experienced by workers. Workers also switch jobs and change employment
status because of “supply-side” events such as labor force entry, family relocation
and retirement. In addition, workers switch jobs for reasons of career development,
better pay and preferable working conditions. Roughly speaking, the creation of
new jobs and the destruction of old ones reflect demand-side developments in the
y
Steven J. Davis is William H. Abbott Professor of International Business and Economics,
Graduate School of Business, University of Chicago, Chicago, Illinois; Research Associate,
National Bureau of Economic Research, Cambridge, Massachusetts; and Visiting Scholar,
American Enterprise Institute, Washington, D.C. R. Jason Faberman is Research Economist,
Office of Employment and Unemployment Statistics, Bureau of Labor Statistics, Washington,
D.C. John Haltiwanger is Professor of Economics, University of Maryland, College Park,
Maryland, and Research Associate, National Bureau of Economic Research, Cambridge,
Massachusetts.
Journal of Economic Perspectives—Volume 20, Number 3—Summer 2006—Pages 3–26
labor market, while worker-flow measures also capture supply-side events and job
switching.
U.S. statistical agencies have recently developed some remarkable new datasets
that yield a richer, fuller picture of labor market flows. We use these new sources
and several older sources to develop evidence about the magnitude and distribu-
tion of labor market flows in the cross section and over time. We also characterize
the relationship of hires, separations, quits and layoffs to the creation and destruc-
tion of jobs by individual employers. Our evidence reveals that the micro relations
between worker flows and job flows, while complex and nonlinear, are fairly stable
over the business cycle. That is, business cycle swings mainly involve shifts in the
distribution
of employer growth rates rather than big shifts in hires, separations and
layoffs conditional on employer growth. We also show that some unusual aspects of
the labor market downturn during and after the 2001 recession are explained by
the micro relations between worker flows and employment growth. Our attention
to the aggregate implications of micro heterogeneity and nonlinearities follows
work by Bertola and Caballero (1990), Dunne, Roberts and Samuelson (1989),
Davis and Haltiwanger (1990, 1992), Caballero and Engel (1991), Caballero
(1992), Foote (1998) and others.
Labor Market Flows: Concepts, Measures and Magnitudes
Basics
For any given business and at any level of aggregation, the net change in
employment between two points in time satisfies a fundamental accounting
identity:
Net Employment Change


Hires


Separations
Worker Flows


Creation


Destruction
Job Flows
Job creation is positive for an expanding or new business, and job destruction is
positive for a shrinking or exiting business. Aggregating across employers within a
region or industry typically yields large positive values for both job creation and job
destruction. While a single employer can either create or destroy jobs during a
period, it can simultaneously have positive hires and separations. Hence, the flow
of hires exceeds job creation, and the flow of separations exceeds job destruction.
As an example, consider a business with two quits during the period and one
replacement hire. The worker flows at this business consist of two separations and
one hire, and there is a net change of one destroyed job. These concepts of worker
flows and job flows are easily aggregated by cumulating over business establish-
ments or firms.
To express the labor market flows from
t


1to
t
as rates, we divide by the
average of employment in
t


1 and
t
. This calculation yields growth rates in the
4 Journal of Economic Perspectives

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT 🙂