We—Marshall Steinbaum, who has recently joined the Roosevelt Institute as a visiting fellow, and Mike Konczal—have a new working paper out titled Declining Entrepreneurship, Labor Mobility, and Business Dynamism: A Demand-side Approach. We hope you check it out! We think it adds some important evidence on an unfolding debate. Here is a great write-up by Anna Louie Sussman in the Wall Street Journal this morning.
This paper provides an alternative explanation for the recent trends of declining entrepreneurship, falling labor mobility, and rising concentration of employment in old firms and large firms. Our explanation focuses on weakening demand, especially during the slow recovery from the last two recessions. That demand slowdown should, in turn, be investigated further, keeping in mind both secular stagnation and how power is shifting in favor of the owners and managers of incumbent firms alongside rising profits and inter-firm inequality. The key findings in this report are:

Wages Are Falling the Most Where Dynamism Has Fallen the Most.

If labor mobility or “dynamism” were declining due to excessive regulation and the increasing cost of job-switching or starting a new firm, then standard economic theory predicts wages and earnings would increase. But the data show that earnings have declined most where the declines in dynamism and mobility have been worst. This is true across metropolitan areas and industries as well as across new hires and all workers; in the chart below, each dot refers to a metropolitan area.