Local Labor Market Tightness and Job Quality: Evidence from Job Changers

We examine how labor market tightness affects workers' job amenities and quality. Using novel data from the Survey of Household Economics and Decisionmaking (SHED), and multiple measures of labor market tightness, we estimate that a 10 percent increase in job vacancies per thousand residents leads to a 7-12 percent increase in the probability of changing jobs, an 11-18 percent increase in the (unconditional) probability of switching to a self-assessed overall better job, and similar-size increases in pay and benefits, interest in the work, and better opportunities for advancement. Tight labor markets thus not only improve worker pay, in line with earlier studies, but also improve job amenities more broadly, and by roughly the same proportion. Consequently, the benefits to workers of a tight labor market are likely underestimated when based on pay alone.