Occupational Upgrading and the Business Cycle

30 Pages Posted: 21 Feb 2003

See all articles by Paul J. Devereux

Paul J. Devereux

University College Dublin - Department of Economics; IZA Institute of Labor Economics

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.

Suggested Citation

Devereux, Paul J., Occupational Upgrading and the Business Cycle. Available at SSRN: https://ssrn.com/abstract=330721

Paul J. Devereux (Contact Author)

University College Dublin - Department of Economics ( email )

Belfield
Dublin 4, 4
Ireland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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