Routine-biased technological change and employee outcomes after mass layoffs: evidence from Brazil

Abstract

We investigate the impact of “routinization” on the labor outcomes of displaced workers. We use a rich Brazilian panel dataset and an occupation-task mapping to examine the effect of job displacement in different groups, classified according to their tasks. Our main result is that following a layoff, workers previously employed in routine-intensive occupations suffer a more significant decline in wages and more extended periods of unemployment. As expected, job displacement has a negative and lasting impact on wages. Still, workers in routine-intensive occupations are more impacted than those in non-routine occupations in terms of wages (an increase of one point in the routine-intensity index results in a further decline of 2% in workers’ relative wages) and employment. Furthermore, our results indicate that workers in routine-intensive occupations are more likely to change occupations after the shock, and those who do not switch occupational fields suffer a more significant decline in wages. Lastly, even though the loss of employer-specific wage premiums explains 13% of displaced workers’ drop in wages, it does not explain routine-intensive workers’ more substantial losses.

Essays on technology adoption and the labor market

“…For instance, Lewandowski et al, 2017 study the intergenerational disparities in the de-routinization of jobs in 12 European countries and find a significant relationship between age groups and shifts in the task composition. The decreasing demand for routine occupations also challenges existing education and training systems to respond to changing skill demands, especially given the fact that loweducated workers are commonly more affected by the routinization process (Martins-Neto et al, 2022). It is crucial to adequately equip the labor force with the necessary skills to guarantee maximum benefits from recent technological advancements, stimulating the development of competencies with increasing demand -an excellent example of this is the soft-skills training for employees in the hotels and accommodation industry (for instance, the training from Quality Assurance Agency, 2015 in the UK).…”