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Mike Konczal and Marshall Steinbaum...examine the worrying decline of business dynamism in America...

The trend seems to be linked to a change in the habits of American workers, especially the young adults for whom early-career job changes are an important contributor to long-run success. They have become less likely to switch jobs and move to new cities.It is possible that regulations keep Americans from jumping to new jobs or places, thereby jamming the process of economic reinvention. Some research has indicated that the growth of occupational licensing, which makes it harder to enter many service-sector industries, constrains labour mobility. Other work points to high housing costs—a consequence of overly strict land-use rules—as a force repelling workers from productive places....

Messrs Konczal and Steinbaum reckon these explanations cannot fully account for America’s doldrums. If red tape were the main constraint on the economy, then workers who do successfully move from one job to another are likely to be moving to one that pays them a lot more. And places with lower levels of economic turnover ought to enjoy higher wage growth, as firms struggle to attract scarce workers. But job changes seem not to provide much of a wage fillip, the authors find, suggesting that people are staying put because other firms are uninterested in hiring new workers and feel little pressure to offer high wages. Similarly, places in America where dynamism is very low tend to suffer unusually weak growth in pay....

Konczal and Steinbaum argue that firms do not need to compete for workers because, increasingly, they do not need to compete at all.... Profit as a proportion of GDP has lingered near the highest level in half a century. In a more competitive market, upstart firms would hire labour and pressure big firms to use their cash for job-creating investments.... Bigger gains might come from creating an economy in which firms found themselves needing to compete to attract workers...

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