Job mobility, reallocation and wage growth: A tale of two countries

Abstract

Job reallocation is a key driver of aggregate wage growth, but its role in different economic systems remains understudied. This paper takes a comparative view and analyses the role of job mobility in job reallocation and aggregate wage growth in Norway, comparing it to published results for the United States. The results show first that, as expected, overall job mobility is much lower in Norway compared to the United States, likely reflecting the compressed wage distribution. However, the speed of job reallocation from low-wage to high-wage firms is similar to or even higher than in the United States. Second, in both Norway and the United States, the process of job reallocation is strongly pro-cyclical. This is entirely driven by the pro-cyclical nature of net job-to-job mobility from low- to high-wage firms. Third, for Norway, the bulk of aggregate wage growth reflects on-the job wage growth, while its cyclicality is largely driven by net job-to-job mobility from low to high-wage firms. This paper shows that reallocation is not necessarily less efficient in more egalitarian societies with lower mobility and different wage structures.