Occupational Job Ladders and the Efficient Reallocation of Displaced Workers

I investigate how movements up and down an occupational job ladder lead to earnings gains and losses for both displaced and non-displaced workers. I find both types of workers exhibit similar rates of upward and downward mobility, and relative occupational wages before mobility strongly predict the direction of mobility. I argue these patterns indicate that occupational sorting after displacement is efficient, nonetheless, displaced workers earn 9% less per hour than non-displaced workers who make occupational changes of the same magnitude. After evaluating a variety of alternative mechanisms, I conclude sorting to lower-paying firms is likely the primary driver of these comparative wage losses for displaced workers. Such losses constitute a reallocation of rents rather than a distortion in the assignment process, which has direct policy implications.