Arbeitspapier

Job Stability, Earnings Dynamics, and Life-Cycle Savings

Labor markets are characterized by large heterogeneity in job stability. Some workers hold lifetime jobs, whereas others cycle repeatedly in and out of employment. This paper explores the economic consequences of such heterogeneity. Using Survey of Consumer Finances (SCF) data, we document a systematic positive relationship between job stability and wealth accumulation. Per dollar of income, workers with more stable careers hold more wealth. We also develop a life-cycle consumption-saving model with heterogeneity in job stability that is jointly consistent with empirical labor market mobility, earnings, consumption, and wealth dynamics. Using the structural model, we explore the consequences of heterogeneity in job stability at the individual and macroeconomic level. At the individual level, we find that a bad start to the labor market leaves long-lasting scars. The income and consumption level for a worker who starts working life from an unstable job is, even 25 years later, 5 percent lower than that of a worker who starts with a stable job. For the macroeconomy, we find welfare gains of 1.6 percent of lifetime consumption for labor market entrants from a secular decline in U.S. labor market dynamism.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 8710

Classification
Wirtschaft
Unemployment: Models, Duration, Incidence, and Job Search
Macroeconomics: Consumption; Saving; Wealth
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Subject
employment risk
job stability
consumption-saving behavior

Event
Geistige Schöpfung
(who)
Kuhn, Moritz
Ploj, Gašper
Event
Veröffentlichung
(who)
Center for Economic Studies and Ifo Institute (CESifo)
(where)
Munich
(when)
2020

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Kuhn, Moritz
  • Ploj, Gašper
  • Center for Economic Studies and Ifo Institute (CESifo)

Time of origin

  • 2020

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