Occupational downgrading and upgrading in Britain

The willingness of workers to move down an occupational hierarchy is a potentially important source of flexibility in the labour market. But, relatively little is known about the scale or pattern of occupational up- and downgrading. This paper examines who downgrades and the cyclical structure of up- and downgrading. We find that occupational downgrading is surprisingly large relative to flows into unemployment. Individuals who have a high payoff to skilled work, such as educated workers, are less likely to downgrade. Contrary to expectations, the rate of downgrading is found to be greater in the boom, while upgrading follows the more conventional expectation of also being procyclical. This finding is interpreted as evidence consistent with the rationing of jobs in the downgrading process, contrary to the assumptions of simple dual labour market models.