Internal and External Job Ladders in the U.S. Labor Market
Publication Date
4-8-2025
Grant Type
Early Career Research Award
Description
A fundamental characteristic of the U.S. labor market over the last four decades has been the dual aging of workers and firms. In 1987, the percentage of workers younger than 24 years and firms younger than five years was 18 and 22 percent, respectively. By 2017, these percentages had nearly halved. Over the same period, the percentage of workers older than 55 years and firms older than 11 years nearly doubled.
The aging of workers and firms has had far-reaching implications, shaping the secular trends observed in various labor market outcomes over this period. These include declines in measures of firm turnover, such as firm entry and exit rates, as well as job creation and destruction rates (Karahan, Pugsley & Sahin 2022, Engbom 2019). As older firms grew larger and increasingly dominated local labor markets, their market power expanded (Peters & Walsh 2021, Hopenhayn, Neira & Singhania 2022). Moreover, as older and larger firms became more stable in terms of size, worker separation and unemployment rates exhibited a declining trend (Crump, Eusepi, Giannoni & Sahin 2019).
Another important trend observed during this period was a decline in the frequency of worker reallocations across employers, captured by Employer-to-Employer (EE) transitions. Between 1985 and 2017, EE transitions fell by nearly 20 percent, attracting significant attention in research and policy regarding their origins and consequences. Since workers typically experience increases in pay, productivity, or amenities when switching jobs across employers, these transitions are commonly associated with upward mobility on the job ladder. Their decline—referred to as the decline in worker reallocation or dynamism—has raised concerns about the decreasing flexibility of US labor markets.
