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Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings

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  • Brad J. Hershbein

    () (W.E. Upjohn Institute for Employment Research)

  • Lisa B. Kahn

    (Yale University)

Abstract

Routine-biased technological change (RBTC), whereby routine-task jobs are replaced by machines and overseas labor, shifts demand towards high- and low-skill jobs, resulting in job polarization of the U.S. labor market. We test whether recessions accelerate this process. In doing so we establish a new fact about the demand for skill over the business cycle. Using a new database containing the near-universe of electronic job vacancies that span the Great Recession, we find evidence of upskilling—firms demanding more-skilled workers when local employment growth is slower. We find that upskilling is sizable in magnitude and largely due to changes in skill requirements within firm-occupation cells. We argue that upskilling is driven primarily by firm restructuring of production towards more-skilled workers. We show that 1) skill demand remains elevated after local economies recover from the Great Recession, driven primarily by the same firms that upskilled early in the recovery; 2) among publicly traded firms in our data, those that upskill more also increase capital stock by more over the same time period; and 3) upskilling is concentrated within routine-task occupations -- those most vulnerable to RBTC. Our result is unlikely to be driven by firms opportunistically seeking to hire more-skilled workers in a slack labor market, and we rule out other cyclical explanations. We thus present the first direct evidence that the Great Recession precipitated new technological adoption.

Suggested Citation

  • 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.
  • Handle: RePEc:upj:weupjo:16-254
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    1. repec:aea:aecrev:v:107:y:2017:i:5:p:168-73 is not listed on IDEAS
    2. Gregory Verdugo & Guilllaume Allègre, 2017. "Labour force participation and job polarization : evidence from Europe during the Great Recession," Documents de Travail de l'OFCE 2017-16, Observatoire Francais des Conjonctures Economiques (OFCE).
    3. Grinis, Inna, 2017. "The STEM requirements of "non-STEM" jobs: evidence from UK online vacancy postings and implications for skills & knowledge shortages," LSE Research Online Documents on Economics 85123, London School of Economics and Political Science, LSE Library.
    4. Georg Graetz & Guy Michaels, 2017. "Is Modern Technology Responsible for Jobless Recoveries?," American Economic Review, American Economic Association, vol. 107(5), pages 168-173, May.
    5. David Deming & Lisa B. Kahn, 2015. "Skill Requirements across Firms and Labor Markets: Evidence from Job Postings for Professionals," NBER Chapters,in: Firms and the Distribution of Income: The Roles of Productivity and Luck National Bureau of Economic Research, Inc.
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    7. Jüßen, Falko & Bredemeier, Christian & Winkler, Roland, 2017. "Fiscal Policy and Occupational Employment Dynamics," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168193, Verein für Socialpolitik / German Economic Association.
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    9. Ammar Farooq, 2016. "The U-shape of Over-education? Human Capital Dynamics & Occupational Mobility over the Lifecycle," 2016 Papers pfa484, Job Market Papers.
    10. Deming, David & Kahn, Lisa B., 2017. "Skill Requirements across Firms and Labor Markets: Evidence from Job Postings for Professionals," Working Paper Series rwp17-022, Harvard University, John F. Kennedy School of Government.
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    13. Nuarpear Warn Lekfuangfu & Voraprapa Nakavachara & Paphatsorn Sawaengsuksant, 2017. "Glancing at Labour Market Mismatch with User-generated Internet Data," PIER Discussion Papers 53, Puey Ungphakorn Institute for Economic Research, revised Jan 2017.

    More about this item

    Keywords

    Job polarization; job postings; RBTC; recessions; routine-biased technological change; upskilling; vacancies;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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