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Business Income Dynamics and Labor Market Fluidity

Author

Listed:
  • Hyatt Henry
  • Kristin Sandusky L.

    (Center for Economic Studies, U.S. Census Bureau, Washington, DC, United States)

  • Murray Seth

    (Board of Governors of the Federal Reserve System, Washington DC, United States)

Abstract

The share of the U.S. population that receives business income has increased substantially in recent decades. At the same time, worker hire and separation rates declined, with worrying implications for productivity and wage growth. In this paper, we explore the relationship between business income (BI) receipt and labor reallocation. We show that BI recipients are largely excluded from existing measures of labor reallocation. Including BI recipients reduces the measured decline from 1994 to 2014 in the hire and separation rates by 8.3–8.7%, respectively, primarily among jobs that were secondary sources of income or short in duration. We present evidence that worker transitions between wage and salary jobs and BI represent labor reallocation, as opposed to reclassification of employees as independent contractors.

Suggested Citation

  • Hyatt Henry & Kristin Sandusky L. & Murray Seth, 2021. "Business Income Dynamics and Labor Market Fluidity," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-51, January.
    • Handle: RePEc:vrs:izajle:v:10:y:2021:i:1:p:51:n:2
    DOI: 10.2478/izajole-2021-0004
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    References listed on IDEAS

    as
    1. Henry Hyatt & James Spletzer, 2013. "The recent decline in employment dynamics," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    2. Fujita, Shigeru & Moscarini, Giuseppe & Postel-Vinay, Fabien, 2020. "Measuring Employer-to-Employer Reallocation," IZA Discussion Papers 13472, Institute of Labor Economics (IZA).
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    Cited by:

    1. Joonkyu Choi & Nathan Goldschlag & John C. Haltiwanger & J. Daniel Kim, 2021. "Early Joiners and Startup Performance," NBER Working Papers 28417, National Bureau of Economic Research, Inc.
    2. Henry R. Hyatt, 2022. "Firm age and job creation in the US," IZA World of Labor, Institute of Labor Economics (IZA), pages 501-501, November.

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    More about this item

    Keywords

    labor reallocation; employment dynamics; self-employment; business ownership;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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