SDG 8: Decent Work and Economic Growth | SDG 10: Reduced Inequalities
Institutions: Reserve Bank of India (RBI) | Ministry of Labour and Employment (MoL&E)
The European Central Bank (ECB) Economic Bulletin article, βAnd yet we move: evidence on job-to-job transitions in the euro area,β finds that the rate of workers changing employers (Job-to-Job, or J2J, transitions) is a crucial indicator of labor market tightness and a key driver of aggregate wage inflation. The evidence shows that workers in lower-skilled occupations are significantly more mobile and account for the bulk of J2J transition fluctuations across Germany, Spain, and France.
Mobility in higher-skilled occupations is substantially lower in comparison. The overall impact on aggregate wage inflation, therefore, hinges crucially on the large share of workers in lower-skilled occupations. The report also notes that age affects mobility: workers aged 15 to 24 change jobs much more frequently, while the aging euro area labor force is expected to exert a negative impact on the overall J2J transition rate going forward.
The concentration of labor market mobility among lower-skilled occupations highlights that this segment is the transmission channel for labor market tightness into core inflation. For India, monitoring skill-based J2J transitions is vital for the RBI when formulating monetary policy, as tight labor conditions in low-skilled sectors (which constitute a large employment base) will exert disproportionate pressure on wages and consequently, inflation.
What is the Job-to-Job (J2J) Transition Rate, and why does it matter for inflation?β The Job-to-Job transition rate is the share of workers who change employers between two consecutive quarters without experiencing a period of unemployment. It matters for inflation because a high J2J rate signals a tight labor market where workers feel confident leaving their current job to negotiate a better salary elsewhere. Since lower-skilled workers form the bulk of the mobile labor force, their propensity to switch employers dictates the overall pressure on aggregate wage inflation, influencing the slope of the wage Phillips curve.
Relevant question for policy stakeholders: How should the Ministry of Labour and Employment leverage skill development programs to increase mobility and productivity in higher-skilled occupations to balance wage-driven inflation risks?
Follow the full news here: And yet we move: evidence on job-to-job transitions in the euro area