# **2 What Explains Differential Impacts across Groups?**

_Studies of past crises and the current great recession typically refer to three potential mechanisms to explain particular groups’ vulnerability to economic downturns._ These are: Differences in workers’ initial exposure to the shock, firms’ employment decision during a downturn, and workers’ labor market behavior in response to household income declines.

_Sectoral employment differences are particularly salient for women._<sup>3</sup> Worldwide, women are moderately more likely than men to work in the service sector rather than the industrial sector (ILO, 2010b).<sup>4</sup> Initially, the brunt of the current crisis was borne by workers in heavily affected sectors such as manufacturing, construction, and financial services. Partly as a result of occupational segregation, both current and past recessions in the United States have caused greater job losses for men, who are disproportionately represented in vulnerable sectors (Elsby et al., 2010). In Canada and Finland, initial reductions in employment during the current recession were also greater in male-dominated sectors such as manufacturing, construction, and finance (ILO, 2010b). However, several studies emphasize the potential vulnerability of women, based on women’s increasing participation in the globalized workplace (Sabarwal, 2011), or assertions that women are over-represented in export-oriented manufacturing sectors hit hardest by the crisis (Ghosh, 2010, Whalby, 2009, ILO, 2010). In fact, for 16 of the 17 counties in this analysis, men were more concentrated in the industrial sector than women (See Figure A1.).

_In contrast to gender, less evidence exists regarding occupational segregation by age, education, and region._ In the 17 countries in our sample, differences in sectoral employment patterns between youth and adults tend to be small (Figure A2). This is consistent with a study of several European and North American countries that found mixed evidence of a link between pre-crisis patterns of youth employment and subsequent increases in youth unemployment; there was a marked relationship for construction but none for manufacturing (Verick, 2009). With respect to differences in education and region, less educated and rural workers are more likely to participate in agriculture, which may help insulate them from this and other downturns. We know of no study, however, that describes in detail how sectoral employment patterns depend on education and region of residence.

_The second main mechanism that can explain differential impacts are the profit-maximizing decisions of firms._ Firms can respond to a crisis by adjusting employment, wages, and hours. Workers’ level of firm specific skills, labor market attachment, and labor market regulations all influence firms’ employment decisions. In particular, firms may find young and unskilled workers more dispensable because they have

> 3 See, for example, Polochek (1979, 1985) and other references in Altonji and Blank (1999)

> 4 The ILO estimates that, in 2009, 47 percent of women worldwide worked in services, while 37 percent worked in agriculture and 16 in manufacturing. The corresponding percentages for men are 40, 33, and 27. Unfortunately, the ILO’s Key Indicators of the Labor Market does not disaggregate sectoral employment by age, education, or region.

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