The Weaker US Job Ladder Has Slowed Wage Growth

Why It Matters

The findings reveal a structural drag on wage growth that stems from reduced labor‑market competition, highlighting a key lever for policymakers seeking to boost earnings and address inequality.

Key Takeaways

• Upward job mobility fell ~50% from 1980s to 2010s
• Employer concentration and non‑competes explain ~60% of mobility decline
• Weaker on‑the‑job search cut real wage growth by 0.7 % annually
• Largest wage effects occur at big, high‑paying firms
• Housing lock‑in and dual‑career constraints have minor impact

Pulse Analysis

The study adds a fresh dimension to the long‑standing debate over why real wages have stagnated since the 1980s. By constructing a new upward‑mobility metric from the Current Population Survey, the authors demonstrate that the traditional job ladder—where workers climb to better‑paying positions—has eroded by roughly half. This decline is not driven by slower wage growth within firms or measurement quirks, but by a systemic reduction in the efficiency of on‑the‑job search, a channel previously underexplored in macro‑labor literature.

Two forces emerge as primary culprits: rising employer concentration and the proliferation of non‑compete agreements. State‑level analysis shows that regions experiencing sharper increases in market power and tighter contract restrictions see the steepest drops in mobility. Together, these factors explain about 60% of the observed decline, suggesting that a more monopolistic labor market hampers workers’ ability to negotiate better offers, especially at large, high‑paying firms where the wage premium has historically been strongest.

The macroeconomic implications are substantial. The authors estimate that the weakened job ladder shaved 0.7 percentage points off annual real wage growth, accounting for roughly one‑third of the overall slowdown. This effect operates both mechanically—fewer workers switch to higher‑paying jobs—and through general‑equilibrium adjustments, as firms lower posted wages when competition for talent wanes. Policymakers aiming to revitalize wage growth may therefore need to address labor‑market concentration and the enforceability of non‑competes, alongside traditional levers such as education and training.