Our discussion leads to the hypothesis that fluid labor markets promote high levels of employment. Conversely, according to this hypothesis, a secular decline in labor market fluidity is a force for lower employment rates.
…The loss of labor market fluidity suggests the U.S. economy became less dynamic and responsive in recent decades. Direct evidence confirms that U.S. employers became less responsive to shocks in recent decades, not that employer-level shocks became less variable…
The authors only speculate about the reasons for a less fluid labor market. An older labor force; changes in business models (I think of big firms coming in to replace mom-and-pop retailers), occupational licensing, health-insurance job lock?
I’d take a hard look at how they measure reallocation before I would accept this conclusion. For example, a lot of tech sector workers are independent contractors. On one level, they stay self employed for years, while on another they provide great fluidity to the job market. Is a contract counted as a job reallocation or just a business transaction?