Labor market turnover and inequality in Latin America
- In Latin America, job exit rates to nonemployment are similar to those of European countries, such as Portugal, Italy, and Germany, where labor market regulations are more stringent. In contrast, job-to-job transition rates are higher, aligning more closely with those prevailing in the U.S. and Ireland.
- We present new evidence showing a higher annual wage growth rate for job-to-job changers compared to stayers in Latin America, due to turnover capturing the immediate gains from search behavior in the short run.
- Younger workers benefit relatively more from the positive effects of job-to-job changes, as expected. We also show that transitions are relatively higher within the informal sector for most countries, and particularly so for workers without college education. Moreover, job separations and transitions from formal into informal sector occur more often among low-skill and young individuals.
- Long-run wage growth is lower for job changers than for stayers, meaning that, while in the short run the search effects tend to dominate those of human capital, the opposite occurs in the long run. As unskilled workers change jobs more frequently, this suggests that job changes are inequality-increasing in the long run.
- Policies to reduce wage inequality should focus on improving the conditions for positive turnover towards better investment and, thus, higher-quality jobs.
