Shifts In Labor Demand Research Articles

Automation and disappearing routine occupations in Japan

We examine the implications of automation technology in Japan since 1980, comparing different local labor markets with different degrees of automation exposure. First, we do not find evidence that automation reduces employment rate within demographic groups and automation encourages workers to move from regular to non-regular employment. Second, we show that automation shifts employment from routine occupations in the manufacturing sector to service sectors, while increasing the share of establishments and sales in the manufacturing sector. Finally, we show that this shift in labor demand is attributed to younger generations and non-college-educated workers.

Understanding the racial employment gap: The role of sectoral shifts

The employment rate for Black men worsened significantly relative to White men during the second half of the 20th century. We explore the role of broad sectoral shifts in labor demand over this period in explaining this trend. We first quantify changes in local employment rates and population in response to local labor demand shifts for both groups of workers. We then combine our estimates with a stylized model that incorporates frictional local labor markets and imperfect mobility across markets. Our framework enables us to aggregate local responses while accounting for geographic mobility and regional employment composition. We find that sectoral reallocation can account for at most, one-fifth of the total exacerbation in the employment rate differential between Black and White men over 1970–2010. Out-migration from harder-hit markets, while large, only slightly mitigates the impact of negative labor demand shifts. We also find that most of the predicted change in the employment rate differential is due to differential response rather than differential exposure to sectoral shifts across groups.

How Responsive Are Wages to Firm-Specific Changes in Labour Demand? Evidence from Idiosyncratic Export Demand Shocks

Abstract Do firms adjust wages in response to changes in their own demand level or to changes in competitive pressure from rival employers? We study how exporters adjust wages in response to unexpected product demand shocks during the 2008–9 Great Recession. Using rich data on Portuguese firms’ pre-recession export shipments, we measure firm-level shocks to export demand during the Recession. We show that shocks constructed at the firm level are not necessarily firm-specific and can be decomposed into a common component affecting all producers in a product market and an idiosyncratic component affecting individual firms within markets based on the locations of their pre-recession customers. We demonstrate that while both components impact firms’ output and their workers’ wages, the common component spills over from firms to their labour market rivals, whereas the idiosyncratic component does not. We find that 10–15% of firms’ idiosyncratic demand passes through to their employees’ wage growth with no effect on retention rates, implying significant dependence of wages on noncompetitive quasi-rents. Moreover, we find that wages respond primarily to shifts in internal labour demand when labour markets are thin, but they respond more to competition from other employers when labour markets are fluid. These results indicate that employers’ ability to set wages hinges on the underlying competitiveness of the labour market.

The Employment Effects of Technology, Trade, and Consumption in Global Value Chains: Evidence for Developing Asia

Global value chains (GVCs) have been a vehicle for job creation in developing Asia, but technology can also displace workers through automation or reshoring of production. We use an input–output approach to examine how employment responded to consumption, trade, and technological progress in 16 economies that accounted for about 95% of employment in developing Asia from 2008 to 2018. Structural decomposition analysis based on the Asian Development Bank’s Multiregional Input–Output database combined with harmonized cross-economy occupation by industry data indicates that, other things being equal, technological change within GVCs and task relocation relate to a decline of routine manual, relative to nonroutine cognitive, occupations in manufacturing. We find no evidence of major shifts in labor demand due to reshoring. Domestic consumption expenditure of goods and services is associated with an increase in labor demand that is large enough to offset efficiency changes in GVCs.

Skill-driven recommendations for job transition pathways.

Job security can never be taken for granted, especially in times of rapid, widespread and unexpected social and economic change. These changes can force workers to transition to new jobs. This may be because new technologies emerge or production is moved abroad. Perhaps it is a global crisis, such as COVID-19, which shutters industries and displaces labor en masse. Regardless of the impetus, people are faced with the challenge of moving between jobs to find new work. Successful transitions typically occur when workers leverage their existing skills in the new occupation. Here, we propose a novel method to measure the similarity between occupations using their underlying skills. We then build a recommender system for identifying optimal transition pathways between occupations using job advertisements (ads) data and a longitudinal household survey. Our results show that not only can we accurately predict occupational transitions (Accuracy = 76%), but we account for the asymmetric difficulties of moving between jobs (it is easier to move in one direction than the other). We also build an early warning indicator for new technology adoption (showcasing Artificial Intelligence), a major driver of rising job transitions. By using real-time data, our systems can respond to labor demand shifts as they occur (such as those caused by COVID-19). They can be leveraged by policy-makers, educators, and job seekers who are forced to confront the often distressing challenges of finding new jobs.

The cessation of rising employment rates at older ages in Australia, 2000-2019

Background In the first decade of the 21st century, employment at older ages surged in Australia, benefitting the Australian economy. Subsequent to 2010, however, employment rates at older ages ceased rising for older men and the increases were much more moderate for women.
 Aim The aim of this paper is to examine these older-age employment trends in more detail, particularly the association between older-age employment trends and the business cycle. Some attention is also given to alternative explanations related to changes in the characteristics of the population and industrial structure.
 Data and methods Two main data sources are used: published tables from the monthly Australian Bureau of Statistics Labour Force Surveys and the Australian censuses for the years 2006, 2011 and 2016. The methods used are primarily descriptive.
 Results Strong labour demand in the first decade of the 21st century stimulated the entry to employment of those out of the labour force, especially at ages 45-54 and especially for men. A cooling of labour demand following the global financial crisis terminated this process in the second decade. There were strong associations between older age employment and various socio-economic characteristics, but, in general, changes in the composition of the population or in the rates of employment by these characteristics did not contribute to the cessation of rising employment after 2010.
 Conclusions Employment rates at older ages in Australia in the first two decades of the 21st century were the results of shifts in labour demand before and after the global financial crisis. Policy related to the taxation of superannuation also induced workers with adequate superannuation, especially public sector workers, to continue working to at least age 60.

PRECARIOUS PATHWAYS INTO RETIREMENT AND NEW RISKS FOR GENDERED ECONOMIC EXCLUSION IN SWEDEN, 1990-2015

The ability and disposition of ageing people to maintain their labour market activity and/or to retire from work structurally depend on pension systems, activation policies, ageism, changing for labor demand and economic shifts. Structural conditions are changing, but social change does not mature homogeneously and neither do the institutional shifts induced by it. Gains in opportunities and resources do not benefit all people, groups and even societies in the same way. Changes increase insecurities and life course inhomogeneity, create unequally distributed challenges and show asynchrony in shifts and outcomes. They generate new precarity in ageing and socially structured risks for exclusion in work and retirement and refer to existing later life inequalities by cohort, gender, region, education, class and ethnicity. From this perspective of ageing and social change, the paper deals with shifts in late work and retirement patterns and later-life outcomes under changing institutional conditions, focusing on gendered risks for economic exclusion and later life precarity in Sweden. Swedish registry data comprising individual work and health histories as well as employer, regional and neighborhood information on the total population 50+ ever living in Sweden 1990-2015 is used in a cohort sequential perspective. Analyses focus on gender inequalities and concentrate on occupational activities, retirement transitions and pension revenues under changing social conditions. Models find increasingly heterogeneous preretirement and transition patterns, new gender gaps and increasing risks of economic exclusion in retirement with disadvantaged groups as forerunners in overall relative declines in later-life economic positions.

From Product Concentration to Local Labor Market Outcomes: The Effect on Industry Wages

In this paper, I examine whether higher product market power can affect labor earnings through its effect on overall labor demand in distinct markets, as a set of dominant firms replaces employment by competitors. To identify relative labor demand shifts, I focus on variations in the spatial concentration within an industry following increases in market power.

The Employment Effects of Technological Innovation, Consumption, and Participation in Global Value Chains: Evidence from Developing Asia

Global value chains (GVCs) have been a vehicle for job creation in developing Asia, but there is mounting concern that more sophisticated and cost-effective technology could displace workers through automation or reshoring of production. We use the demand-based input–output approach in Reijnders and de Vries (2018) to examine how employment responded to consumption, trade, and technological advances in 12 economies that accounted for 90% of employment in developing Asia during the period 2005–2015. Structural decomposition analysis based on the Asian Development Bank Multiregional Input–Output Tables combined with harmonized cross-country occupation data indicates that, other things being equal, technological change within GVCs was associated with a decrease in labor demand across all sectors, and an increase in the share of nonroutine cognitive occupations. We also find that increased domestic consumption expenditures of goods and services generated an increase in labor demand large enough to offset the negative employment impact of technological change. Finally, we do not find evidence of major shifts in occupational labor demand due to reshoring.

Technology, offshoring and the rise of non-routine jobs

This paper documents the growing share of non-routine jobs in the labor force of thirty-seven advanced and emerging countries over the period 1999–2007. To examine the role of offshoring and technological change in driving this labor market development, we develop a task-based model of production in global value chains and propose a decomposition of changes in occupational labor demand. In the setup of the model, technological change affects the total number of workers with a certain occupation throughout the production chain, while task relocation consists of a shift in occupational labor demand from one location to another. For the empirical implementation we combine harmonized cross-country occupations data with world input-output tables. The results of our decomposition suggest that technological change increased the number of non-routine relative to routine occupations in all countries. The effect of task relocation is less strong, and works in the same direction for advanced countries such as Germany and the United States but in the opposite direction for emerging countries such as China and Poland.

Regional growth differences in China for 1995–2013: an empirical integrative analysis of their sources

An integrative empirical analysis of several regional economic outcome variables in China for the period of 1995–2013 reveal the major sources of regional growth differences in China. Patterns of growth in population, per capita income, gross regional product, housing prices and changes in unemployment rates are identified using principal components analysis. Regression analysis of principal component scores is applied to identify geographic and administrative status patterns in the sources of the growth. The analysis suggests that shifts in labor supply largely were responsible for the regional growth differences over the period, though shifts in labor demand were nearly equally as important. The results have implications for evaluating the success of regional development policies such as the Western Development Strategy.

Foreign direct investment and its impact on real wages: evidence from Turkish micro-level data

This paper analyzes the role of foreign direct investment (FDI) on wages, using Turkish firm-level data from 2003 to 2010, a period which coincides with significant FDI inflows both in manufacturing and service sector firms in the region. We explore the possibility of increased foreign presence translating into shifts in either labor demand or supply curves thereby resulting in changing the total wage bill or wage per worker in the host country. To empirically test this relationship we employ a dynamic specification of the wage equation. After addressing endogeneity concerns, the results reveal that foreign presence measured in terms of intra- and inter-sectoral linkages is related to higher wage bills in the host economy, hence strengthening the argument for attracting greater foreign investment to enhance labor welfare.

A closer look at the skilled labor demand increase in Brazil

PurposeThe purpose of this paper is to evaluate skilled labor demand determinants in Brazil, considering alternatives explanations: changes in relative wages, non-homothetic technology output growth and skill-biased technical change.Design/methodology/approachThis study relies on a rich and unique matched employer-employee data set for manufacturing sector, from 1996 to 2003. The analysis considers a translog functional form labor demand system estimated using seemingly unrelated regression and instrumental variables to control for possible measurement errors and wages and output endogeneity.FindingsThe demand function estimates suggest that: labor demand underlying technology is non-homothetic, research and development investment is biased toward skilled workers, the non-homothetic technology is not skill biased so output changes contributed positively for skilled labor increase, relative wages played a significant role and international trade has little explanatory power explaining labor demand shifts.Originality/valueThis is the first paper that considers alternative explanations for the increase in the demand of skilled workers for manufacturing in Brazil simultaneously: changes in relative wages, output changes with non-homothetic technology, skill-biased technical change and, to a lesser extent, international trade. The study challenges current empirical evidence that considers trade and trade liberalization as the main factor explaining labor demand shifts.

LOCAL LABOR MARKETS AND NATURAL RESOURCES: A SYNTHESIS OF THE LITERATURE

AbstractA primary way that natural resources affect a locality is through the demand for labor, with greater extraction requiring more workers. Shifts in labor demand can be measured through changes in employment and earnings, the main labor market outcomes, or through changes in the population and income, more generally. These changes may spillover into the nonresource economy, leading to greater overall effects or possibly crowd out; be spread unequally across the population, thereby altering the distribution of income and the poverty rate; or influence educational attainment, as people choose between additional schooling and work. In this review, the literature linking natural resources to local labor markets is synthesized by organizing existing studies according to their resource measurement and the outcomes that they consider. This synthesis provides an accessible guide to a literature that has boomed in recent years. It also identifies promising avenues for future research and lays a foundation to further generalize the evidence through an eventual meta‐analysis.

Energy Prices and Wage Dispersion

We find that oil supply shocks decrease average real wages, particularly skilled wages, and increase wage dispersion across regions, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil supply shocks, have counterfactual implications for the response of wage dispersion. Only an additional response in labor supply can explain this latter fact highlighting the importance of general equilibrium effects in a spatial context. We provide additional empirical evidence of regionally directed worker reallocation and housing prices consistent with our spatial model. Finally, we show that a calibrated version of our model can quantitatively match the estimated effects of oil supply shocks.

Policy levers to increase jobs and increase income from work after the Great Recession

AbstractThe depth of the Great Recession, the slow recovery of job creation, the downward trend in labor force participation, high long-term unemployment, stagnant or declining wages for low-to-medium skill jobs owing to adverse labor demand shifts, and a greater rebound in low-wage than mid- or higher-wage jobs raised concerns that the normal business cycle dynamics of recovery from the recession will be insufficient to offset the diminished labor market prospects of many workers. These concerns have spurred serious consideration of policies to encourage job creation and higher income from work beyond the more immediate countercyclical policies that were adopted in response to the Great Recession. Among the policies generating continuing or renewed interest are hiring credits, higher (sometimes much higher) minimum wages, and a more substantial earned income tax credit (EITC) for childless individuals. This paper discusses these policy options, what we know about their likely effects and trade-offs, and what the unanswered questions are; the focus is on US evidence.JEL codes:J2, J3, J6

Local Labor Markets and Natural Resources: A Synthesis of the Literature

A primary way that natural resources affect a locality is through the demand for labor, with greater extraction requiring more workers. Shifts in labor demand can be measured through changes in employment and earnings, the main labor market outcomes, or through changes in the population and income, more generally. These changes may spillover to the non-resource economy, and their effects may be felt unequally across the population, thereby altering the distribution of income and the poverty rate. Educational attainment might also be influenced, as people choose between additional schooling and work. We synthesize the literature on the local labor market effects of natural resources by organizing the existing studies according to their measurement of resources and the outcomes that they consider. This synthesis provides an accessible guide to a literature that has boomed in recent years. It also identifies promising avenues for future research and lays a foundation to further generalize these results through an eventual meta-analysis.

Disentangling Labor Supply and Demand Shocks Using Spatial Wage Dispersion: The Case of Oil Price Shocks

We find that oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion across regions, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only an additional response in labor supply can explain this latter fact highlighting the importance of general equilibrium effects in a spatial context. We provide additional empirical evidence of regionally directed worker reallocation consistent with our spatial model.

Policy Levers to Increase Jobs and Increase Income from Work after the Great Recession

The depth of the Great Recession, the slow recovery of job creation, the downward trend in labor force participation, high long-term unemployment, stagnant or declining wages for low-to-medium skill jobs owing to adverse labor demand shifts, and a greater rebound in low-wage than mid- or higher-wage jobs, raised concerns that the normal business cycle dynamics of recovery from the recession will be insufficient to offset the diminished labor market prospects of many workers. These concerns have spurred serious consideration of policies to encourage job creation and higher income from work beyond the more immediate countercyclical policies that were adopted in response to Great Recession. Among the policies generating continuing or renewed interest are hiring credits, higher (sometimes much higher) minimum wages, and a more substantial Earned Income Tax Credit (EITC) for childless individuals. This paper discusses these policy options, what we know about their likely effects and tradeoffs, and what the unanswered questions are; the focus is on U.S. evidence.

Technological Change, Skill Demand, and Wage Inequality: Evidence from Indonesia

• We examine how technological change affects wage inequality in Indonesia. • Indonesia has experienced rising wage inequality since the early 2000s. • Inequality increased after shifts in relative labor demand within and between industries. • International trade and FDI increase demand for skilled workers and skill premium. This study provides empirical evidence of the impact that technological progress has on wage inequality in Indonesia. The share of educated workers and their skill premiums have recently increased. A supply–demand analysis, using labor force survey data during 1990–2009, shows that both the between- and within-industry shifts of labor demand that favored skilled workers contributed to the widening wage inequality since the early 2000s. Evidence from firm-level data in the manufacturing sector indicates that the diffusion of foreign technologies through imports and foreign direct investment caused demand to shift toward more skilled labor and increased wage inequality.