DP17887 Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles
Sectoral expansions and contractions require labor reallocation out of declining industries and into booming industries. Which types of workers gain and lose during these transitions? Using linked employer-employee panel data from Brazil spanning a full boom-bust cycle in its oil and gas sector, we find that timing of labor market entry is critical. Only highly educated workers hired into oil at the onset of a boom reap significant earnings and employment benefits. Low-education workers and later entrants constitute firms' margin of adjustment during busts. These workers experience persistent earnings and employment penalties, reflecting a last-in, first-out pattern. We document mechanisms driving these between-cohort and within-cohort inequalities. Accumulated experience in professional occupations insulates high-education early entrants from downturns, while a boom in sector-specific education erodes earnings of later entrants. We discuss implications for workers during the energy transition.
