Wage mobility reduces the persistence of wage inequality. We develop a framework to quantify the contribution of employer-to-employer movers to aggregate wage mobility. Using three decades of German social security data, we find that inequality increased while aggregate wage mobility decreased. Employer-to-employer movers exhibit higher wage mobility, mainly due to changes in employer wage premia at job change. The massive structural changes following German unification temporarily led to a high number of movers, which in turn boosted aggregate wage mobility. Wage mobility is much lower at the bottom of the wage distribution, and the decline in aggregate wage mobility since the 1980s is concentrated there. The overall decline can be mostly attributed to a reduction in wage mobility per mover, which is due to a compositional shift toward lower-wage movers.

Wage mobility reduces the persistence of wage inequality. We develop a framework to quantify the contribution of employer-to-employer movers to aggregate wage mobility. Using three decades of German social security data, we find that inequality increased while aggregate wage mobility decreased. Employer-to-employer movers exhibit higher wage mobility, mainly due to changes in employer wage premia at job change. The massive structural changes following German unification temporarily led to a high number of movers, which in turn boosted aggregate wage mobility. Wage mobility is much lower at the bottom of the wage distribution, and the decline in aggregate wage mobility since the 1980s is concentrated there. The overall decline can be mostly attributed to a reduction in wage mobility per mover, which is due to a compositional shift toward lower-wage movers.

Analysis of business dynamism outside the US has been limited by the availability of comparable cross-country data. This column presents new insights on the trends and drivers of business dynamism using a novel dataset for 19 European countries. Across all 19 countries, the authors document structural declines in job reallocation rates and employment shares in young firms. The decline in job reallocation can be rationalised by both declines in the responsiveness of labour demand to productivity shocks and lower dispersion of productivity innovations. A new decomposition suggests that the decline in responsiveness can be attributed mainly to lower sales growth and stronger markup increases.

We study changes in job reallocation in Europe after 2000 using novel microaggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness.