Occupational Switching and Self-Discovery in the Labor Market

This paper studies workers' occupational switching behavior and how lifetime earnings inequality is affected by the match between workers' ability and the skills required by their occupation. Using Armed Services Vocational Aptitude Battery (ASVAB), O*NET, and National Longitudinal Survey of Youth 1979 (NLSY79), we create empirical measures of the match quality between each worker's ability and the skills emphasized by his/her occupation, and analyze their effects on workers' labor market outcomes. We find that low match quality---what we also call 'skill mismatch'---between one's skills and required occupational skills reduces wage growth during an occupational tenure. Furthermore there is a persistence across occupations: match quality in occupations held early in life has a strong effect on wages in future occupations. We view these findings within the context of a general equilibrium model of occupational choice and human capital accumulation. We believe that our study sheds light on the importance of (i) occupational match on determination of wages, and (ii) workers' learning on their ability and the skills required by occupations.