Worker Composition and Flows over the Business Cycle
Paper Session
Saturday, Jan. 3, 2026 2:30 PM - 4:30 PM (EST)
- Chair: Shigeru Fujita, Federal Reserve Bank of Philadelphia
Skill Heterogeneity and Aggregate Labor Market Dynamics
Abstract
I study aggregate labor market dynamics when workers have heterogeneous skills for tasks which are subject to non-uniform labor demand shocks. Aggregate employment-wage comovements partly reflect reallocation of different workers across tasks and into employment, which representative agent economies would interpret as a labor supply shock or labor wedge. Developing a method to estimate the multidimensional skill distribution, I show that a frictionless model with realistic heterogeneity can replicate the mean wage increase and employment collapse of the Great Recession. The model rationalizes these unusual dynamics through changes in the skill distribution and composition of sectoral shocks.Workers' Task and Employer Mobility over the Business Cycle
Abstract
We investigate cyclical changes in workers’ task portfolios, highlighting their direction, magnitude, and distribution. Task changes are not only very common but provide information about the skills required across jobs. During recessions, a larger share of employer switches do not involve task changes. When changes occur, they tend to be more substantial. The cyclicality of task changes among employer-to-employer movers contrasts sharply with that of hires from unemployment. We link our findings to the “sullying” and “cleansing” effects of recessions, uncovering a novel cleans ing effect associated with employer-to-employer transitions and a sullying effect tied to employer changes through unemployment.The Dual U.S. Labor Market Uncovered
Abstract
Aggregate U.S. labor market dynamics are well approximated by a dual labor market supplemented with a third, predominantly home-production, segment. We uncover this structure by estimating a Hidden Markov Model on labor market transitions for 1980-2021. Workers in the primary sector, roughly 55% of the population, are almost always employed and rarely experience unemployment. The secondary sector, 14% of the population, absorbs the bulk of seasonal and business cycle fluctuations. Those in the tertiary segment only infrequently participate in the labor market. Jobs in the primary sector offer more job security, pay higher wages, and offer higher returns to education and experience, consistent with the conjectures of the conventional Dual Labor Market (DLM) hypothesis. However, the individual-level data suggest limited mobility between sectors rather than perfect segmentation. We show this by estimating a generalized DLM model with mobility between three segments which yields that our aggregate results are robust to this extension, despite different individual-level dynamics.Discussant(s)
Andre Kurmann
,
Drexel University
Christopher Huckfeldt
,
Federal Reserve Board
Robert Ulbricht
,
Boston College
David Wiczer
,
Federal Reserve Bank of Atlanta
JEL Classifications
- E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
- J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers