Does increased job switching signal higher wage growth?

David Staunton and Reamonn Lydon ()

No 13/EL/18, Economic Letters from Central Bank of Ireland

Abstract: In many labour markets, job switching – when a worker leaves a job with one employer for a new job with another employer – is a strong predictor of future wage growth. If increased job switching could be used as a leading indicator of wage growth in Ireland, it could signal over-heating pressures in the economy. This Letter uses survey data to show that job switching rates tend to rise rapidly when the labour market is tight, and higher job switching tends to be followed by higher wage growth. In recent quarters, job switching rates are close to, and by some measures above, levels last seen in the early-2000s, which suggests that wage growth could strengthen in the nearterm.

Date: 2018-12
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