Why Job Churn Is Good
More than 55 million Americans, or four out of every 10 workers, left their jobs in 2005. And this is good news, because there were over 57 million new hires that same year.
These statistics illustrate a recent and growing trend of dynamism in our job market, especially among younger workers. Data on labor demand in the United States, gathered for the Job Openings and Labor Turnover Survey (JOLTS), show that the 12 months ending in November had the highest average of labor turnover since the U.S. government began tracking this information in 2000. But the data also show that our economy has maintained a consistently strong ratio of new hires to separations. Over the year ending in November, new hires in America exceeded employee separations by an average of 364,000 per month.
Indeed, the data show that each month millions of Americans leave their jobs -- most of them voluntarily -- and millions more are hired. This is what we want: an economy in which people looking to move up have as many opportunities as possible from which to choose. Promoting this dynamism, and the opportunities it creates, should be a focus of our economic policy.
This flexibility of our job market is one key reason the United States successfully competes in an increasingly interconnected global economy. In fact, our workers lead the international marketplace in this trend. Job tenure averages 6.6 years for Americans, compared with an average of 8.2 years for Britons, 10.6 years for Germans, 11.2 years for the French and 12.2 years for the Japanese. Even more striking is that, on average, workers in the United States will have 10 different employers between ages 18 and 38.
This dynamism of our labor force strengthens the U.S. economy because each move to a new employer can involve greater responsibility, greater pay or both. And the time workers spend in search of employment is decreasing. In December, the average duration of a job search was the shortest in more than four years.
Unfortunately, what usually makes headlines is a big company's layoff of workers. What gets less coverage is the 40 months of job growth we have recently enjoyed, the historically low unemployment rate (4.5 percent), record tax revenue and an acceleration in real wage growth over the past year. This is good news for the generation preparing to graduate from high school and college. Unlike their grandparents, who built careers around companies rather than opportunities, members of the class of 2007 will enter the workforce with an understanding that change may be the only constant in their professional careers.
The dynamism of our workforce helps keep the United States competitive because it increases not only the number of jobs available but also the productivity of those holding jobs. U.S. productivity has steadily accelerated over the past three decades, as workers look to improve their standard of living and pursue different opportunities through new employment.
The challenge for policymakers is to keep pace with the dynamism of our economy, since the trend is likely to accelerate in the future. Governments, both federal and state, must build upon and support the institutions that make our country great. One strength is our educational system. Americans seeking to make job changes have a resource not found elsewhere in the world: our nation's community college system, which provides higher education and the chance for workers to retrain at a relatively minimal cost after they enter the workforce.
Government must also ensure that neither fiscal nor regulatory policy impedes the growing dynamism of our economy. For example, job seekers would benefit from the freedom to change employment without having to disrupt their health coverage and their retirement savings plans. Recognizing this, we will work throughout the administration to implement policies that both keep pace with the rapid change in our economy and strengthen our position in the international marketplace.
The writer is deputy secretary of the Treasury.