Erika McEntarfer

Cyclical Reallocation of Workers Across Employers by Firm Size and Firm Wage

Do the job-to-job moves of workers contribute to the cyclicality of employment growth at different types of firms? In this paper, we use linked employer-employee data to provide direct evidence on the role of job-to-job flows in job reallocation in the U.S. economy. To guide our analysis, we look to the theoretical literature on on-the-job search, which predicts that job-to-job flows should reallocate workers from small to large firms. While this prediction is not supported by the data, we do find that job-to-job moves generally reallocate workers from lower paying to higher paying firms, and this reallocation of workers is highly procyclical. During the Great Recession, this firm wage job ladder collapsed, with net worker reallocation to higher wage firms falling to zero. We also find that differential responses of net hires from non-employment play an important role in the patterns of the cyclicality of employment dynamics across firms classified by size and wage. For example, we find that small and low wage firms experience greater reductions in net hires from non-employment during periods of economic contractions.

Job-to-Job (J2J) Flows: New Labor Market Statistics from Linked Employer-Employee Data

Flows of workers across jobs are a principal mechanism by which labor markets allocate workers to optimize productivity. While these job flows are both large and economically important, they represent a significant gap in available economic statistics. A soon to be released data product from the U.S. Census Bureau will fill this gap. The Job-to-Job (J2J) flow statistics provide estimates of worker flows across jobs, across different geographic labor markets, by worker and firm characteristics, including direct job-to-job flows as well as job changes with intervening nonemployment. In this paper, we describe the creation of the public-use data product on job-to-job flows. The data underlying the statistics are the matched employer-employee data from the U.S. Census Bureau’s Longitudinal Employer-Household Dynamics program. We describe definitional issues and the identification strategy for tracing worker movements between employers in administrative data. We then compare our data with related series and discuss similarities and differences. Lastly, we describe disclosure avoidance techniques for the public use file, and our methodology for estimating national statistics when there is partially missing geography.

Job-to-Job Flows and the Consequences of Job Separations

This paper extends the literature on the earnings losses of displaced workers to provide a more comprehensive picture of the earnings and employment outcomes for workers who separate. First, we compare workers who separate from distressed employers (presumably displaced workers) and those who separate from stable or growing employers. Second, we distinguish between workers who do and do not experience a spell of joblessness. Third, we examine the full distribution of earnings outcomes from separations - not the impact on only the average worker. We find that earnings outcomes depend much less on whether a job separation is associated with a distressed employer than on whether the separator experienced a jobless spell after the separation. Moreover, we find that workers separating from distressed firms are faster to find jobs at new employers than are other separators.

Business Dynamics Statistics Briefing: Job Creation, Worker Churning, and Wages at Young Businesses

It is well known that young businesses have higher net job creation rates and a higher pace of gross job creation and destruction. Using newly released statistics from the QWI by firm age and firm size, we show this well-known pattern holds in the QWI. But the QWI offer a unique perspective on additional features of the dynamics of workers and jobs by firm age and firm size. In this report we focus on two key features - worker churning and earnings dynamics.We show that a much larger fraction of hiring at young firms is due to job creation relative to more mature firms. However, in spite of this high ratio, the difference between the hiring and job creation rates (what we call worker churning) declines with firm age. The high pace of churning at young firms is consistent with the view that young firms are undergoing a period of experimentation and trial and error. The new findings on worker churning show that this experimentation results in a high churning rate for young firms.Worker churning rates fell substantially in the 2001 and 2007/09 recessions and also exhibit a related secular decline. The cyclical and secular declines in worker churning rates over the last fifteen years are over and above the previously documented decline in business dynamism as measured by job reallocation over the same period. Worker churning reflects the reallocation of workers across existing jobs, and the evidence here is that the pace of such churning has declined. Worker churning arguably contributes to improved match quality between workers and firms; hence, this decline potentially implies a decline in match quality in the United States. In a related fashion, it is an indicator that the U.S. labor market has become less flexible over time, at least in terms of the tendency to have workers move across firms.The secular and cyclical declines in worker churning are connected, since, in both the 2001 and 2007/09 recessions, worker churning declined substantially and then failed to recover to the previous peak. This downward pattern is more apparent for more mature firms; in that respect, young firms are more engaged in this form of flexibility. However, we also know that the share of startups and, therefore, young firms is declining over this same period (which we verify holds in the newly released QWI data). With fewer young firms, the overall decline in worker churning is even greater.Another new perspective on these dynamics that the QWI permits is tracking earnings per worker. We find that workers at young firms have lower earnings per worker than at more mature firms. This is not surprising, since it is clearly related to the well-known finding that workers at larger firms have higher wages and young firms tend to be small. However, we also document that the firm age wage premium has been rising over time. Thus, adding to the trend decline in the pace of startups, we also observe that earnings for workers at such startups have declined in relative terms as well.

Employment Cyclicality and Firm Quality

Who fares worse in an economic downturn, low- or high-paying firms? Different answers to this question imply very different consequences for the costs of recessions. Using U.S. employer-employee data, we find that employment growth at low-paying firms is less cyclically sensitive. High-paying firms grow more quickly in booms and shrink more quickly in busts. We show that while during recessions separations fall in both high-paying and low- paying firms, the decline is stronger among low-paying firms. This is particularly true for separations that are likely voluntary. Our findings thus suggest that downturns hinder upward progression of workers toward higher paying firms - the job ladder partially collapses. Workers at the lowest paying firms are 20% less likely to advance in firm quality (as measured by average pay in a firm) in a bust compared to a boom. Furthermore, workers that join firms in busts compared to booms will on average advance only half as far up the job ladder within the first year, due to both an increased likelihood of matching to a lower paying firm and a reduced probability of moving up once matched. Thus our findings can account for some of the lasting negative impacts on workers forced to search for a job in a downturn, such as displaced workers and recent college graduates. For example, differential sorting and lack of upward mobility can account for roughly a third of the initial earnings impacts of graduating into a large downturn.

Firm Age and Size in the Longitudinal Employer-Household Dynamics Data

The Census Bureau’s Quarterly Workforce Dynamics (QWI) and OnTheMap now provide detailed workforce statistics by employer age and size. These data allow a first look at the demographics of workers at small and young businesses as well as detailed analysis of how hiring, turnover, job creation/destruction vary throughout a firm’s lifespan. Both the QWI and OnTheMap are tabulated from the Longitudinal Employer-Household Dynamics (LEHD) linked employer-employee data. Firm age and size information was added to the LEHD data through integration of Business Dynamics Statistics (BDS) microdata into the LEHD jobs frame. This paper describes how these two new firm characteristics were added to the microdata and how they are tabulated in QWI and OnTheMap

The Promise and Potential of Linked Employer-Employee Data for Entrepreneurship Research

In this paper, we highlight the potential for linked employer-employee data to be used in entrepreneurship research, describing new data on business start-ups, their founders and early employees, and providing examples of how they can be used in entrepreneurship research. Linked employer-employee data provides a unique perspective on new business creation by combining information on the business, workforce, and individual. By combining data on both workers and firms, linked data can investigate many questions that owner-level or firm-level data cannot easily answer alone - such as composition of the workforce at start-ups and their role in explaining business dynamics, the flow of workers across new and established firms, and the employment paths of the business owners themselves.

Interstate Migration and Employer-to-Employer Transitions in the U.S.: New Evidence From Administrative Records Data

Declines in migration across labor markets have prompted concerns that the U.S. economy is becoming less dynamic. In this study, we examine the relationship between residential migration and employer-to-employer transitions in the United States, using both survey and administrative records data. We first note strong disagreement between the Current Population Survey (CPS) and other migration statistics on the timing and severity of any decline in U.S. interstate migration. Despite these divergent patterns for overall residential migration, we find consistent evidence of a substantial decline in economic migration between 2000 and 2010. We find that composition and the returns to migration have limited ability to explain recent changes in interstate migration.