The Role of Sector‐Specific Skills in Post displacement Earnings

Abstract

This article examines how one form of transferable skills, those valued within an industry or sector, may influence reemployment and earnings following permanent job loss. The empirical analysis finds limited evidence of a sector‐specific component to the returns to job tenure. The importance of these skills varies across sectors, with the strongest evidence found for sectors with sustained labor demand and growing employment. There is stronger evidence, particularly in reemployment, for a broader form of sector specificity that is not related to tenure, such as job search skills and vocational training. There is also sectoral evidence that is consistent with the role of individual ability in the returns to tenure.

Industry- and occupation-specific skills of displaced workers

“…For manufacturing workers, Jacobson, LaLonde and Sullivan (1993) found that the main determinant of wage loss after six years of displacement is whether he/she gets (or not) a job in the manufacturing sector, but the 4-digit SIC industry where the reemployment takes place is not relevant. Kletzer (1996) provides further arguments and reaches a slightly different conclusion.…”

“…Involuntary mobility and the reward displaced workers receive for accumulated skills have been a source of great interest for labour economists since the late 1980s (for a survey see Fallick, 1996;and Kletzer, 1996).This research programme aims to answer questions such as: how important are specific skills, and how are the earnings of displaced workers affected by these skills? A myriad of papers have approached the issue of transferability of skills by addressing wage changes associated with job mobility.…”

“…For instance, Stevens (1994) designates transferable skills as an intermediate category of skills that is valued by more than one employer. Neal (1995) and Kletzer (1996) recognise industry-specific skills; Shaw (1984) explores occupation-specific skills; while Sullivan (2010) differentiates between occupation and industry-specific skills as examples of transferable skills. Lastly, for Lazear (2003) skills are general by their very nature.…”

“…Finally, we include dummies for pre-and post-displacement occupations and industries inasmuch as workers accumulate additional specific skills from other sources (that are not captured by job tenure), namely from vocational training off the job -examples are machining and computer skills (Kletzer, 1996).…”

“…The transferability of displaced workers' skills has attracted much attention among labour economists, as documented in several papers published since the late 1980s (e.g. Shaw, 1984;Neal, 1995;Kletzer, 1996;Sullivan, 2010). While it is assumed that industryspecific (Neal, 1995) or occupation-specific skills (Shaw, 1984) might be valuable for more than one employer, there is a lack of consensus regarding the reward for those skills in the labour market.…”