Do recessions accelerate routine-biased technological change?: evidence from vacancy postings

The employment shift from occupations in the middle of the skill distribution towards those at the high and low ends is one of the most important trends to affect the US labor market over the past 30 years. Previous research has suggested that a primary driver of this job polarization is routine-biased technological change (RBTC) whereby new technologies substitute for middle-skill jobs and complement high-skill cognitive jobs. However a long theoretical literature suggests that adjustments to technological change may be more episodic. Whether adjustments to new technology are gradual or sudden is important for policy and understanding economic recovery. If adjustments are sudden and concentrated in downturns, large numbers of displaced workers may be left with the wrong skills for new modes of production.

This article highlights findings from a recent working paper (Hershbein and Kahn 2016) that investigates how the demand for skills in the US labour market changed during and after the Great Recession. It uses nearly all electronically posted job vacancies in 2007 and 2010-2015 collected by the analytics company Burning Glass Technologies and spatial variation in economic conditions. This evidence showed that skill requirements in job vacancy postings differentially increased in metropolitan statistical areas (MSAs) that were hit hard by the Great Recession, relative to less hard-hit areas, and that these differences across MSAs persist through the end of 2015. The increases are prevalent within occupations, more pronounced in the non-traded sector, driven by both within-firm upskilling and substitution from older to newer firms, accompanied by increases in capital stock, and are evident in realized employment. We argue that this evidence reflects the restructuring of production toward more skilled workers and routine-labor saving technologies, and that the Great Recession accelerated this process.

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