The U.S. Job Ladder and the Low-Wage Jobs of the New Millennium

Nellie Zhao, Henry Hyatt and Isabel Cairo
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Nellie Zhao: Cornell University

No 1414, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: In the years following 2000, the U.S. economy has exhibited relatively strong growth in lower-paying jobs. Previous studies have put this growth in the context of shocks to particular higher-paying industries or occupations. In this study, we consider the implications of a ``job ladder'' in the context of labor market downturns associated with the 2001 and 2007-2009 recessions. We propose and estimate a model of on-the-job search, which allows us to explore the effects of aggregate demand shocks on the composition of employment. When aggregate labor market conditions are weak, the least productive employers lose workers through poaching to more productive employers at a slower rate. Our empirical analysis links the slowdown in the job ladder with the buildup in low-paying jobs.

Date: 2016
New Economics Papers: this item is included in nep-dge
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