Human Capital in Transition: on the Changing skill requirements and skill transferability

During the last several decades developed economies underwent salient employment shifts from manufacturing toward service production. This dissertation investigates the meaning of these changes for the occupational and skill structure of the German economy. It elaborates on the skills and occupations at risk of leaving the economy, as well as the factors that drive this risk. The altering skill structure is partly reflected in occupational switching. Therefore, in one chapter I analyze the transferability of human capital across occupations. When workers change occupations part of the previously acquired skills becomes idle at the new job and new skills have to be learnt. In the thesis, previously learnt skills which are not usable at the new occupation are called human capital redundancy and skills that yet have to be learnt are called human capital shortage. After creating measures of human capital shortage and human capital redundancy, we study their role in occupational change and wage dynamics. The major findings of the dissertation can be summarized as follows. Occupations characterized by tasks that can be explained in detailed step-by-step procedures (explicit tasks) gradually declined their share in the German economy in the observed period (1975-2004). Occupations characterized by problem-solving and interactive tasks increased their share in the economy. These changes are correlated with the outsourcing practices of plants, but not with the investments in computer technology. Furthermore, workers are less likely to make occupational switches which render their human capital redundant. They are also less likely to switch to occupations where they have to learn new skills. One exception are young workers who change occupations voluntarily. These workers likely move to more ambitious occupations as part of their career paths. Skill shortages are initially penalized at the new job through lower starting wage, but this penalty is later compensated through steeper wage growth at the new occupation. Skill redundancy is poorly rewarded at the new job