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Occupational Upgrading and the Business Cycle

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  • Paul J . Devereux

Abstract

Many economics theories suggest that the assignment of workers to occupations changes over the business cycle: expansions allow workers to upgrade to occupations that pay higher wages and require more skill. This paper provides some empirical evidence from the USA that such upgrading does occur and that, as predicted, it has greater effects on less‐skilled individuals. Furthermore, the skill composition of new hires changes over the business cycle, even within occupations. Consistent with a job competition model, the education levels of new hires within occupations are higher when the unemployment rate is high and this effect is more pronounced in lower‐paying occupations. The changes in assignment imply that low‐skilled individuals suffer most from recessions in terms of occupation quality and unemployment. The results are consistent with employers responding to a greater supply of educated workers by increasing hiring standards, and so imply that the social return to education may be lower than the private return. However, the results are also consistent with more neo‐classical models of the labor market. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2002.

Suggested Citation

  • Paul J . Devereux, 2002. "Occupational Upgrading and the Business Cycle," LABOUR, CEIS, vol. 16(3), pages 423-452, September.
  • Handle: RePEc:bla:labour:v:16:y:2002:i:3:p:423-452
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    Cited by:

    1. Schlicht, Ekkehart, 2010. "Selection wages and discrimination," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-30.
    2. Venke Furre Haaland, 2016. "The lost generation: Effects of youth labor market opportunities on long-term labor market outcomes," Discussion Papers 835, Statistics Norway, Research Department.
    3. Brad J. Hershbein & Lisa B. Kahn, 2016. "Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings," Upjohn Working Papers and Journal Articles 16-254, W.E. Upjohn Institute for Employment Research.
    4. Joseph G. Altonji & Lisa B. Kahn & Jamin D. Speer, 2016. "Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 361-401.
    5. Robert Gibbons & Michael Waldman, 2006. "Enriching a Theory of Wage and Promotion Dynamics inside Firms," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 59-108, January.
    6. Nagore García, Amparo & van Soest, Arthur, 2015. "New Job Matches and Their Stability Before and During the Crisis," IZA Discussion Papers 9574, Institute for the Study of Labor (IZA).
    7. repec:bla:ecinqu:v:55:y:2017:i:3:p:1370-1387 is not listed on IDEAS
    8. Dieter Verhaest & Eddy Omey, 2010. "The determinants of overeducation: different measures, different outcomes?," International Journal of Manpower, Emerald Group Publishing, vol. 31(6), pages 608-625, September.
    9. Ludsteck, Johannes, 2008. "Wage cyclicality and the wage curve under the microscope," IAB Discussion Paper 200811, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Abe, Yukiko, 2012. "A cohort analysis of male labor supply in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 23-43.
    11. repec:bla:intlab:v:156:y:2017:i:1:p:25-43 is not listed on IDEAS
    12. Büttner, Thomas & Jacobebbinghaus, Peter & Ludsteck, Johannes, 2010. "Occupational upgrading and the business cycle in West Germany," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-37.
    13. Galasi, Péter, 2004. "Túlképzés, alulképzés és bérhozam a magyar munkaerőpiacon, 1994-2002
      [Over-education, under-education and wage premiums on the Hungarian labour market, 1994-2002]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 449-471.
    14. Martin HUMBURG & Andries de GRIP & Rolf van der VELDEN, 2017. "Which skills protect graduates against a slack labour market?," International Labour Review, International Labour Organization, vol. 156(1), pages 25-43, March.
    15. Léné, Alexandre, 2011. "Occupational downgrading and bumping down: The combined effects of education and experience," Labour Economics, Elsevier, vol. 18(2), pages 257-269, April.
    16. Sedláček, Petr, 2014. "Match efficiency and firms' hiring standards," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 123-133.
    17. Haaland, Venke Furre, 2013. "The Lost Generation: Effects of Youth Labor Market Opportunities on Long-Term Labor Market Outcomes," UiS Working Papers in Economics and Finance 2013/8, University of Stavanger.
    18. Daiji Kawaguchi & Tetsushi Murao, 2014. "Labor‐Market Institutions and Long‐Term Effects of Youth Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 95-116, October.
    19. Verhaest Dieter & Velden Rolf van der, 2010. "Cross-country differences in graduate overeducation and its persistence," ROA Research Memorandum 007, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    20. Nagore Garcia, A. & van Soest, Arthur, 2016. "New Job Matches and their Stability before and during the Crisis," Discussion Paper 2016-033, Tilburg University, Center for Economic Research.
    21. Alina Sorgner & Michael Fritsch, 2013. "Occupational Choice and Self-Employment - Are They Related?," Jena Economic Research Papers 2013-001, Friedrich-Schiller-University Jena.
    22. Zwysen, Wouter, 2014. "A disadvantaged childhood matters more if local unemployment is high," ISER Working Paper Series 2014-43, Institute for Social and Economic Research.
    23. Verhaest, Dieter & Bogaert, Elene & Dereymaeker, Jeroen & Mestdagh, Laura & Baert, Stijn, 2016. "Crowding Out in the Labour Market: Do Employers Lend a Hand?," IZA Discussion Papers 9654, Institute for the Study of Labor (IZA).
    24. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics.
    25. Ludsteck, Johannes & Haupt, Harald, 2007. "An Empirical Test of the Reder Hypothesis," Discussion Papers in Economics 1397, University of Munich, Department of Economics.

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