Wednesday, April 11, 2012

Fine print of structural unemployment

This is a follow up on an earlier post. I read the the Fed Atlanta blog post on the effects of the current recession on the earnings of re-employed construction workers (emphasis mine):

Using the SIPP, we investigated the wage changes workers experience before and after an unemployment spell when their new job is in a different industry. Is the wage effect of switching sectors larger for unemployed construction workers relative to those workers in other sectors?

I’m a little puzzled about why there is a sole focus only on those who changed industries especially if we want to get a sense of the extent of structural change. What would have been helpful is the proportion who changed sectors - for instance, of the total who were re-employed what is the percentage who changed sectors. Should we place as much weight on a structural explanation if only 10% of these re-employed were in new industries?

Update (4/12/2011): Another thought is that these changes in sector could be temporary and that when the economy picks up the these workers would go back to their original occupations/industries. This was a point made by Loungani and Rogerson (1989).

Alternatively, are skills industry specific or occupation specific? Looking just at industry changes may overstate the extent of structural change if skills are more occupation specific than industry specific.

No comments: