Rising Between-Firm Inequality and Declining Labor Market Fluidity: Evidence of a Changing Job Ladder

Rising earnings inequality in the last few decades is dominated by rising between firm inequality. In turn rising between firm inequality is dominated by rising inter-industry earnings differentials. Over this same period, there has been declining labor market fluidity. The pace of hires and separations has slowed. Viewed from the perspective of hires, there has been an especially large decline in the pace of hires from nonemployment. We present evidence that these patterns are connected through the lens of a changing job ladder. Our results suggest it has become more difficult to get on the job ladder, as evidenced by the declining hires from nonemployment. Moreover, the rungs of the job ladder have become further apart. In combination, our results suggest there has been an increase in inequality accompanied by a decline in an important form of economic mobility—that is, it has become more difficult to get on and climb the job ladder.