Disaggregating the Well-Being Effects of Creative Destruction: The Roles of Cross- and Within-Sector Job Reallocation

We investigate how labor market dynamism associated with Schumpeterian creative destruction affects individuals’ subjective well-being (SWB), using data from the Gallup U.S. Daily Poll and the U.S. Census Quarterly Workforce Indicators from 2009 to 2016. By decomposing job turnover into within-sector and cross-sector reallocation which is indicative of labor market frictions and structural unemployment respectively, and by accounting for variation across 884 Core-Based Statistical Areas (CBSAs), we provide a nuanced analysis of how business dynamism is associated with SWB across worker groups and geographic space. Our approach accounts for heterogeneity in labor force participation and worker characteristics, offering a richer perspective on the interaction between local labor markets and individual well-being. We find that a 1% change in measures of creative destruction (e.g., total job turnover, within-sector turnover, and cross-sector turnover) corresponds to a 0.54 to 0.65 point change on a 0–10 SWB scale, underscoring the importance of distinguishing among labor market metrics when analyzing well-being impacts. We also find that distinguishing between cross-sector and within-sector turnover is critical to understanding the differential impacts of creative destruction, as each dimension affects workers in distinct ways. Moreover, the magnitude and direction of these effects vary by education, employment status, and gender, highlighting the importance of accounting for socio-demographic heterogeneity in analyses of labor market dynamism.