When UK workers change employers during a recession, they tend to move to occupations that are more similar to what they previously did, both in terms of task content and skill level. This is the result of a slowdown in down-skilling – moving to lower skilled role.
But since changes in wages are not significantly affected by recessions, it seems clear that those who change occupations in a recession are not disadvantaged compared to those who change occupations in normal economic times.
These are the central findings of new research by Aspasia Bizopoulou and Rachel Forshaw, to be presented at the Royal Economic Society's annual conference at the University of Warwick in April 2019.
Previous research has shown that the number of people making the transition to new occupations decreases during recessions. But we still know relatively little about the types of occupations that individuals move to when they are able to gain new employment and how it is affected by the economic climate.
The new study looks at the kind of tasks that people do and how their skill levels are affected when they move jobs during a recession compared to how they would have fared in normal economic times for the UK economy.
The study finds that during recessions, when they change employers, individuals tend to move to occupations that are more similar to their previous occupation in terms of their task content and skill level than if there had not been a recession.
Specifically, an increase in the unemployment rate of one percentage point leads to a decrease of approximately 2 standard deviations in the researchers’ measure of task change and a decrease of 1.5 standard deviations in change in skill level.
This effect is driven by a significant slowdown in down-skilling during recessions, rather than up-skilling. In other words, during a recession workers are less likely to move to a lower skilled role than the one they had previously.
In contrast, there is no change in the likelihood of up-skilling during recessions: individuals are as likely to gain a higher-skilled role. What’s more, in general those that up-skill when they move occupations command a significantly higher wage change – approximately three percentage points higher for the average earner – than those who down-skill or whose skills stay the same.
But there is no significant effect of recessions on the wage changes of up-skilling, down-skilling or transitions with no skill change. These results are evidence against a disadvantageous effect for those who change jobs during recessions in the UK labour market.
To obtain these results, the researchers use the UK’s quarterly Labour Force Survey (LFS) for the years 1997q1-2018q2 and combine this with the O*NET, a dataset containing detailed information on the task and skill content of each occupation. The LFS provides a large sample size – around 60,000 individuals per quarter – which makes it possible to be confident in the applicability of the results to the economy as a whole.
Combining the two datasets makes it possible to derive measures on how similar two occupations are in terms of their content, as well as whether one occupation requires higher levels of skills than another.
The researchers then compare people who move jobs in recessions with those who moved jobs in normal economic times, controlling for the observable differences in individuals, such as race, sex and previous job characteristics.
‘The Task and Skill Content of Job Transitions over the Business Cycle: Evidence for the UK’ by Aspasia Bizopoulou and Rachel Forshaw