Job Displacement and Sectoral Mobility
Job displacement typically leads to sizable and persistent earnings losses for long-tenured workers. These earnings losses are generally larger for displaced workers who change industries once reemployed. Nevertheless, displaced workers may still benefit from different-industry employment. The new sector may be a preferred alternative to nonemployment with zero earnings, may offer better long-run prospects for positive earnings, or may have desirable traits not related to earnings, such as improved benefits or job stability. Given such implications of post-displacement sectoral mobility, and since this mobility is not random, it is important to understand the determinants of these industry changes following job loss. This paper examines the relationship between job displacement and sectoral mobility for long-tenured workers in the United States over the 1996–2019 period. Using two features of the US Current Population Survey—the cross-sectional Displaced Worker Survey and the 16-month longitudinal framework of the Basic Monthly Survey—the author first establishes descriptive patterns of industry switching following job loss and then estimates the causal impact of job displacement on sectoral mobility.
- On net, reemployed displaced workers are drawn to the public administration sector and various services industries, while such workers tend to leave the manufacturing and mining industries.
- Job displacement negatively correlates with sectoral mobility over time, but such job loss has a positive causal effect on sectoral mobility. For workers who are employed or reemployed, the sectoral mobility rate increases by 13.2 percentage points following a job separation, and displacement increases that rate by an additional 7.9 percentage points (59.8 percent).
- The probability of industry switching grows as the number of months following separation increases.
- Displacement’s impact on sectoral mobility falls when never-reemployed workers are included in the estimation, suggesting that the chance of nonemployment is greater after a job loss than after a voluntary job separation.
- A high school or higher education (general training) and industry similarity (industry training) increase the probability of post-displacement sectoral mobility.
- Several factors, including business cycles, affect whether the alternative to sectoral mobility is more likely to be same-industry reemployment or nonemployment.
The finding that pre-displacement education and industry structure facilitate post-displacement industry switching suggests the importance of both individual and market traits, as well as roles for both general and industry-specific skills. Also of policy interest is the finding that several factors affect whether the alternative to sectoral mobility is likely to be same-industry employment or nonemployment. In addition to business cycles, these factors include worker age, and the presence of any children in the worker’s household.
This paper combines two components of the US Current Population Survey to characterize the relationship between job displacement and sectoral mobility for long-tenured workers over the 1996–2019 period: (1) the cross-sectional Displaced Worker Survey and (2) the 16-month longitudinal design of the Basic Monthly Survey. While displacement negatively correlates with mobility over time, such job loss has a positive causal impact on mobility for displaced workers compared with similar non-displaced workers. Education and industry structure facilitate post-displacement industry switching, and several factors, including business cycles, affect whether the alternative to sectoral mobility is likely to be same-industry employment or nonemployment.