America's Flexible Labour Market

How at-will employment and high job turnover make the U.S. labour market unusually dynamic, and the benefits and costs for workers.

The U.S. labour market is known for its flexibility. Employers can usually hire and fire workers easily, and workers move frequently between jobs. This makes the labour market highly dynamic, with both benefits and costs.

At-will employment

In most U.S. states, employment is at will: employers can dismiss workers for any reason that is not illegal, such as discrimination, often without notice or severance pay. Workers can also quit at any time. Many other rich countries require notice periods, severance pay and justification for dismissals.

High churn

Every month, millions of Americans start new jobs and millions leave jobs. This job churn helps workers and firms find better matches, and helps the economy shift workers from declining industries to growing ones. In 2021 and 2022, a record wave of resignations, sometimes called the Great Resignation, saw many workers quit for better pay or conditions.

Benefits

Fast job creation after recessions in many cases.
Lower long-term unemployment than in some European countries.
Opportunities for workers to move to better jobs.

Costs

Insecurity: workers can lose jobs suddenly.
Benefits tied to jobs: health insurance usually comes through employers, so losing a job can mean losing coverage.
Limited paid leave: the U.S. has no national requirement for paid vacation or paid parental leave.
Declining geographic mobility: Americans move between states less often than in past decades, partly because of high housing costs in booming cities.

Losing a job and health insurance

A worker in Ohio is laid off with two weeks' notice. Besides losing income, she loses her employer-provided health insurance. She can buy continued coverage for a limited time but must pay the full premium herself. In many European countries, her health coverage would not depend on her job.

Thinking flexible means worse for workers in every way

Flexibility brings insecurity, but it can also mean more job openings and faster movement into better jobs. The key debate is how to combine flexibility with enough security, as Denmark's flexicurity attempts.

Key takeaways

Most U.S. employment is at will, allowing easy hiring and firing.
High job churn helps match workers to better jobs.
The U.S. labour market often recovers quickly and has lower long-term unemployment.
Insecurity, job-linked health insurance and limited paid leave are costs.