Worker specialization and the consequences of occupational decline

Are workers with poor outside opportunities less responsive and more susceptible to negative demand shifts in routine occupations? To answer this, I create and estimate an occupation specialization index (OSI) using Swedish register data and machine Learning tools. It measures the expected utility difference between a worker’s occupation and his best outside option. This determines the loss he is willing to tolerate to avoid switching. Low-OSI generalists disproportionately left routine work. Their future wage growth was comparable to similar workers initially in non-routine occupations. By contrast, routine specialists largely stayed put and experienced lower wage growth than generalists and non-routine specialists.