Risk of Labor Displacement and Cross-Industry Labor Mobility

Abstract

A well-supported conclusion of previous research is that displacement entails large and persistent costs for workers. It therefore seems reasonable to expect workers to try to anticipate and respond to the risk of displacement. Using 1983–93 data from the Panel Survey of Income Dynamics and the Displaced Workers Supplement to the Current Population Survey, the author investigates whether industry-specific measures of job loss risk are correlated with workers' propensity to cross industry lines for new jobs. She finds that a one standard deviation increase in the risk of job loss (an 86% increase from the mean level) increased the probability of inter-sectoral mobility by 10.5% in a sample of white men. Three factors that appreciably increased the likelihood of inter-sectoral mobility in response to job insecurity were voluntary separation from the previous job, high educational attainment, and being currently employed (as opposed to temporarily laid off).