St. Louis Fed Analysis: Why Are Jobs Not Lasting As Long?

ST. LOUIS — In spite of numerous news stories on why job stability has declined, academic research has not confirmed that. Now, however, new evidence from the Federal Reserve Bank of St. Louis suggests that job stability has indeed declined.

The analysis was done by research analyst Kristie M. Engemann, and economists Leora Friedberg and Michael T. Owyang. Their comments appear in the January issue of The Regional Economist, the Reserve Bank's quarterly publication of business and economic issues. The Regional Economist is also available online at the St. Louis Fed's web site.

Engemann, Friedberg and Owyang found that the job tenure for men has steadily declined, from 9.2 years in 1983 to 8.6 years in 1998. For women, on the other hand, the situation is more complex. Their average tenure actually rose from 7.2 years in 1983 to 7.9 years in 1992, before falling again to 7.2 years in 1998. "The rise over the intervening period at least partly reflects the increased tendency of women to be in the labor force," they said.

In addition, Engemann, Friedberg and Owyang tracked changes during in the expected remaining tenure— the number of years that employees expected to continue working for their current employer during the 1983-98 period. They found that for all levels of experience, both men and women experienced declines in expected remaining tenure over the entire period. Also, the decline in expected remaining tenure for both sexes was greater for more-educated workers than for less-educated workers.

They speculate that one key reason workers may switch jobs more frequently is a decline in the gains from staying in one job for a long period of time. "If, for each additional year at their current jobs, earnings growth is smaller than it used to be, then workers have less to lose if they leave," they said.

Engemann, Friedberg and Owyang analyzed several possible causes for the decline in job tenure:

• Demographics. The representation of older workers within the ranks of displaced employees has increased, meaning that they now possess a weaker sense of job security than previously. Also, women's average job tenure over the course of the past few decades has been affected by two opposing forces. A study by one economist, for example, showed that between 1975 and 1991, the rate at which women, especially those with young children, left the workforce declined, leading to an increase in tenure. As women's participation in the labor force stabilized in the 1990s, on the other hand, other effects became dominant and women's tenure fell.
• Technology. Evidence suggests that rapid technological innovations, such as the spread of computers, have led to more rapid turnover of skilled workers, even while raising the overall demand for skilled employees. "This increase in job flow due to technological change leads to a decline in the average tenure because these workers are switching jobs more often than in the past," said Engemann, Friedberg and Owyang.
• Institutional Changes, Including Decline in Union Membership and Increased International Trade. They cited one study which suggests that the decline in unionization may have reduced the incentives for unskilled workers to remain with their current employers for an extended amount of time, because they may be less attached to the (now) lower-paying, non-unionized jobs. Regarding the increase in global trade, one of the most obvious, negative effects has been job loss and its associated costs in import-competing industries. Between 1979 and 1999, for example, 16.8 million manufacturing workers were displaced, accounting for 37 percent of total displacements among nonagricultural payroll workers. Manufacturing, however, accounted for only 18 percent of total employment, so a higher proportion of manufacturing employees experienced displacement relative to non-manufacturing sectors.

With branches in Little Rock, Louisville and Memphis, the Federal Reserve Bank of St. Louis serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. The St. Louis Fed is one of 12 regional Reserve banks that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. As the nation's central bank, the Federal Reserve System formulates U.S. monetary policy, regulates state-chartered member banks and bank holding companies, and provides payment services to financial institutions and the U.S. government.

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