Specialists or generalists? Cross-industry mobility and wages

Abstract

This paper quantifies the association between industrial specialization at the occupation level and job mobility and earnings for low and middle-wage American workers. I propose the concept of industry specificity to capture the degree of industrial specialization of a worker's occupation. I measure industry specificity using an index of industrial concentration of employment (CEI) defined at the occupation-state-year level. Linking this index to individual-level panel data on wages and job transitions, I show that CEI is negatively associated with workers' wages: moving from the first quartile to the third quartile of industry specificity decreases wages by 13 percent. I next examine the mechanisms that explain these findings. I first find that CEI is negatively associated with cross-industry and cross-occupation mobility, that is, workers employed in industry-specific occupations change industry and occupation less frequently than workers in less specific occupations. In addition, I show that occupation-level factors such as skill uniqueness and automatability increase industry specificity; but they cannot entirely explain the negative effect of CEI on wages. Finally, in line with the main results, I provide suggestive evidence that workers in industry-specific occupations are more vulnerable to industry-wide wage shocks compared to their generalist counterparts.