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.