Snakes or Ladders? Skill Upgrading and Occupational Mobility in the US and the UK during the 1990s

It is frequently argued that the process of skill upgrading has both worsened the employment prospects and decreased the relative wages of unskilled workers. However, workers are not immutably either low skill or high skill, and skill upgrading may offer the opportunity for workers to move up the ‘skill ladder’. In this paper we examine the balance of these two effects. We use comparable individual-level panel data from the US and the UK to relate the probability of individual occupational movement to the extent of skill upgrading at the industry level. We find that whilst skill upgrading does indeed have a positive impact on the probability of moving up the job ladder, this is insufficient to outweigh the increased probability of unemployment. We also find that workers moving down or off the ladder suffer large wage penalties.