Occupational Prices, Job Polarization and the Distribution of Occupational Returns

Presenter: Ben Etheridge, University of Essex

The occupational composition of employment has shifted dramatically over the last 30 years worldwide. To determine the causes of these shifts it is important to identify the underlying prices on occupations. These likely differ from average wages because of selection effects. We use a panel data fixed-effects estimator to provide new and coherent evidence for two large economies: the UK and Germany. We use data from the British Household Panel Survey and from the German Socio-Economic Panel. In both countries, we find that growth in occupational prices is strongly correlated with employment share growth. This evidence, which is hidden by evidence for observed wages, is consistent with occupational shifts being explained by changes to labour demand, such as from changes to technology. We then use the panel data structure to assess and interpret the effects of occupational changes on workers across the sectors. First, we decompose wage growth into changes in occupational prices and the effects from occupational reallocation. Second, we use the underlying Roy framework, and variation in prices, to uncover the full distribution of occupational returns across the population.