Published 05 March 2020

Effects of major changes in the labor market

The present study focuses on the analysis of the employment trajectories for redundancies caused by major workplace closures and/or layoffs.

To this effect, the analysis uses a rich microdata to investigate the employment trajectories at the sectoral and occupational level for affected individuals.

The main objective is to provide a better understanding of the factors affecting the mobility of the workforce ex-post the workplace closures and/or lay-offs. In doing so, we show eventual needs of carefully adapted regional policies that take into consideration regional mobility patterns of both men and women in order to promote an equal labour market.

The main conclusion is that the cost of transition of the workforce to new employment ex-post major redundancies due to workplace closures and/or layoffs is minimal, for both the individual and the economy, in the short term (5-years).

This is the case even when considering the fact that the period of analysis coincided with the Financial Crisis years (2007–2010) during which the Swedish economy experienced a major downturn. The unemployment spell for majority of the workforce is rather very short-lived, and the transition to new employment occurs with minimal loss in terms of wage-income. The most negatively affected group within the workforce are the high-income earners who experience a relative drop in wages in absolute terms.

In terms of international comparison, the results are not easily comparable, but the conclusion the OECD analysis and results show that the losses in terms of wage-income for the workforce in the Nordic countries (incl. Sweden) are significantly smaller in comparison to the rest of the advanced economies (OECD 2013).

In terms of the cross-sectoral and regional occupational mobility, we observe that a significant share of the workforce opt for, and/or is offered, new employment opportunities within the same occupation and sector. We find that a third of the workforce opt for a different sector and occupation, despite the risk of the productivity loss for the individual due to the potential mismatch in supply and demand for different types of human capital. At the same time, the reallocation of the workforce due to occupational mobility has a significant impact on the knowledge and skills transfer across firms and sectors, and which can improve upon the productivity level in the case of successful matching between demand and supply for skills and human capital.

Sector Relatedness, as a measure of the industry mix, plays a major role in the ability for the workforce to transition to new employment across regions. We find that, both big urban agglomerations and smaller regions are represented among the best performing labour markets in terms of the absorptive capacity of “new workforce”. In fact, it is the presence of a high degree of Sector Relatedness, rather than the size of the regional economy per se, that correlates more positively with successful transitions to new employment.

The presence of a high degree of Sector Relatedness at the regional level translates into a minimal loss of human capital associated with occupational transition, both for the individual and the local labour market.

From a labour market equality perspective, we observe that women are overrepresented within the lowest wage-income brackets. However, it is also that case that women are overrepresented within the group of the workforce that are in the process of transitioning out of the lowest wage-income earners, due to, or rather thanks to, major redundancies.

This result holds even when we control for a number of individual and structural parameters.

An important result from the analysis shows that occupational transitions tend to reproduce, if not reinforce, the “old” gendered pattern within the labour market in terms of professional occupations of man vs. women. For instance, the share of women forced out, or that choose to transition out from, job positions within the industrial sector is significantly higher compared to men. We observe a similar dynamic for men within, for instance, the healthcare sector. In other words, the occupational mobility patterns reinforce rather than progressively changes the gendered labour market.

In terms of occupational status, we found that women tend to benefit more compared to men, especially for the workforce within the low status occupations. Indeed, the results show that the share of women that transition to higher status occupations ex-post major redundancies is higher compared to men.