Wage growth has stagnated in recent decades for a large share of workers. At the same time, declining rates of job change mean that workers are not accessing this historical engine for wage growth. Together, these trends suggest a role for public policy in raising the return to work and establishing the conditions for workers to successfully climb the job ladder and achieve career progress. Doing so entails human capital investments before and during labor market engagement.
But it also means eliminating or mitigating unnecessary policy barriers to dynamism. For example, there is no strong policy rationale for the lack of reciprocity in states’ occupational licensing requirements. Rationalizing and modernizing such rules might not return dynamism to its previous levels, but it could be a part of an effective overall policy response.
Jay Shambaugh, Ryan Nunn, and Patrick Liu
The Brookings Institution
February 2018
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