High and low earnings jobs: The fortunes of employers and workers

The focus of the literature on the effect of job changes has been on the consequences of job destruction on the individual worker. In this paper we analyze the impact on the earnings distribution of both job creation and job destruction. We establish a link between job reallocation and the movement of workers into and out of the tails of the earnings distribution. Both job creating and job destroying employers shed jobs mostly from the middle and lower tails of the earnings distribution, although this is cyclically very sensitive. Labor mobility (triggered by reallocation) is risky: mobile workers will generally end up in the upper or lower tail of the distribution rather than in the middle. If workers move across industry boundaries, they typically move to the tails of the distribution. In sum, the fortunes of workers depend on the fortunes of their employers.