Workers in Declining Occupations Face About 5% Lower Cumulative Earnings, NBER Study Finds
Key Takeaways
- •Workers whose first jobs were in occupations that later shrank by at least 25 percent earned roughly 5 percent less cumulatively over twenty years, despite logging slightly more quarters of work.
- •The researchers connected the 2000 US Decennial Census with administrative employment and earnings records through 2020, tracking more than 2.4 million workers across two decades.
- •The American earnings gap closely resembles findings from Sweden and Norway, even though the way employment adjusts differs across the three countries.
- •Workers in shrinking occupations switched fields substantially but not completely, while children's eventual occupations showed little connection to whether their household heads began in a declining occupation.
- •The findings were released as NBER Working Paper 35614, and NBER circulates such papers for discussion and comment rather than as peer-reviewed publications.
Workers who begin their careers in an occupation that subsequently declines face a more modest long-run penalty than is often assumed, according to a new working paper from the National Bureau of Economic Research (NBER). Workers initially employed in occupations that contracted by at least 25 percent accumulated about 5 percent less in cumulative earnings — despite working slightly more quarters.
Tracking 2.4 Million Workers Over Two Decades
The study, by Erling Barth, Maria Forthun Hoen, Sari Pekkala Kerr, and William R. Kerr, links the 2000 US Decennial Census to administrative employment and earnings records extending through 2020. That linkage allows the researchers to follow more than 2.4 million workers across twenty years of their careers. The 2000 Census, part of the nationwide count conducted every ten years, provides a detailed snapshot of American households and their occupations at the start of the study period. The study window also spans the early-2000s downturn that followed the dot-com bust and the 2007–2009 Great Recession, so the careers tracked include workers who passed through repeated episodes of labor-market stress.
From the paper's abstract:
"We study long-run career consequences of initial employment in an occupation that subsequently declines. Linking the 2000 Decennial Census to US administrative employment and earnings records through 2020, we follow more than 2.4 million workers. Employment in an occupation that contracts by at least 25 percent is associated with about 5 percent lower cumulative earnings despite slightly more quarters worked. The earnings differential closely matches evidence from Sweden and Norway, although employment adjustment differs. Occupational mobility is substantial but incomplete, while children's later occupational destinations are much less tied to their household heads' 2000 occupational-growth categories."
Key Findings
- Earnings penalty: Workers in occupations that contracted by at least 25 percent showed about 5 percent lower cumulative earnings, even though they worked slightly more quarters.
- International comparison: The US earnings differential closely matches evidence from Sweden and Norway, although the pattern of employment adjustment differs across countries.
- Occupational mobility: Mobility among affected workers was substantial but incomplete.
- Intergenerational outcomes: Children's later occupational destinations were much less tied to their household heads' 2000 occupational-growth categories.
The cross-country result is notable because Sweden and Norway have labor-market institutions that differ from those of the United States, yet the earnings differential is of similar magnitude in all three countries; what differs, according to the authors, is how employment adjusts. The intergenerational finding also bears on debates about economic mobility, showing that children's eventual occupations were far less tied to whether the household head started in a shrinking or growing occupation. Together, the results speak to long-running policy discussions about how best to support workers in contracting occupations, from retraining to income supports.
Authors and Availability
The paper (NBER Working Paper 35614) is authored by Erling Barth, Maria Forthun Hoen, Sari Pekkala Kerr, and William R. Kerr. NBER, a nonprofit economic research organization based in Cambridge, Massachusetts, circulates working papers for discussion and comment; they are not peer-reviewed publications, and readers can consult the paper's NBER page for any subsequent revisions.
Commentary
The post appeared on the economics blog Marginal Revolution on August 19, 2026. Its author wrote that the findings strike them "as somewhat less of a problem than I might have thought" and noted that "the results may have implications for AI as well." The question of which occupations might contract next has drawn renewed attention amid rapid advances in generative AI, though the paper's data, which run through 2020, predate the current wave of those systems.
Source: Marginal Revolution
