Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings
Upjohn Institute Working Paper 16-254, 2016
53 Pages Posted: 30 Mar 2016 Last revised: 9 Aug 2016
Date Written: March 25, 2016
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.
Keywords: Job polarization, job postings, RBTC, recessions, routine - biased technological change, upskilling, vacancies
JEL Classification: D22, E32, J23, J24, M51, O33
Suggested Citation: Suggested Citation