Routine Tasks and Recovery from Mass Layoffs

We analyze the effect that an occupation’s degree of routine intensity has on the long-term costs of job loss. To this end we identify workers who experienced displacement as a result of a mass layoff in Germany between 1980 and 2010. We use detailed information on these individuals’ employment biographies before and after the mass layoff in order to control for institutional differences as well as individual self-selection into occupations. Our results show that conditional on covariates the employment biographies of workers in occupations with a high and a low extent of routine intensity do not differ prior to the mass layoff. However, we find that after the event the negative effect on subsequent employment and earnings is significantly more severe for former employees of routine-intensive occupations. A possible explanation for this finding is that the human capital accumulated in routine-intensive occupations has become less valuable. Moreover, we show that the effect of routine-intensity varies across age, sex and qualification groups as well as with population density and time of the mass layoff.