Labour market transitions after layoffs: the role of occupational skills

We study the role of occupational skills for labour market transitions after layoffs. Drawing on Lazear’s skill-weights approach, we develop empirical measures for occupational specificity and the skill distance between occupations to investigate how skills map into job mobility and wages. Our analysis reveals several important insights. First, higher occupational specificity is associated with lower job mobility and a longer period of unemployment. However, it is also associated with higher wages. Workers receive a wage premium of about 9% for re-employment in a one standard deviation more specific occupation. These results suggest a risk–return trade-off to educational investments into more specific skills. Second, the skill distance is negatively associated with wages. Workers moving between occupations with similar skill requirements suffer smaller wage losses than those with more distant moves. Thus, skills appear to be transferable across occupations and to play a pivotal role in the determination of wages.

Putting Tasks to the Test: The Case of Germany

The demand for skills has changed throughout recent decades, favouring high-skilled workers that perform abstract, problem-solving tasks. At the same time, research shows that occupation-specific skills are beneficial for labour market success. This article explores (1) how education, workplace characteristics and occupations shape job task requirements, (2) how within-occupation job task content relates to wages, and (3) whether these relationships vary across types of tasks due to their presumably varying degrees of occupational specificity. Using worker-level data from Germany from 2011–2012 the article shows that a large part of task content is determined by occupations, but that task requirements also differ systematically within occupations with workers’ educational levels and workplace characteristics. Moreover, differences in task usage within occupations are robust predictors of wage differences between workers. Finally, the results suggest that non-routine manual tasks have a higher occupational specificity than abstract and routine tasks, and that manually skilled workers can generate positive returns on their skills in their specific fields of activity.