The Alpha Beta Gamma of the Labor Market

43 Pages Posted: 12 Apr 2021 Last revised: 27 Apr 2022

See all articles by Victoria Gregory

Victoria Gregory

New York University (NYU) - New York University

Guido Menzio

New York University (NYU)

David Wiczer

State University of New York (SUNY), Stony Brook

Multiple version iconThere are 2 versions of this paper

Date Written: April 2021

Abstract

Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α's β's and γ's. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ's. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Gregory, Victoria and Menzio, Guido and Wiczer, David, The Alpha Beta Gamma of the Labor Market (April 2021). NBER Working Paper No. w28663, Available at SSRN: https://ssrn.com/abstract=3824540

Victoria Gregory (Contact Author)

New York University (NYU) - New York University

Guido Menzio

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

David Wiczer

State University of New York (SUNY), Stony Brook

Health Science Center
Stony Brook, NY 11794
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
120
PlumX Metrics