Upskilling During the Great Recession: Do Employers Demand Greater Skill When Workers Are Plentiful?

Awarded Scholars:
Daniel Shoag, Harvard University
Alicia Sasser Modestino, Northeastern University
Project Date:
Jul 2014
Award Amount:
Project Programs:
Future of Work

Like most downturns, the Great Recession has been particularly hard on low-skilled workers. While one potential explanation posits that this reflects the cyclical nature of industries and occupations that employ many low-skilled workers, another points to the ability of unemployed high-skilled workers to take middle- and low-skilled jobs during the downturn. For example, over the past five years, employment in middle-skilled occupations has fallen for less-educated workers, while simultaneously rising for workers with college degrees. There is also some evidence that higher-educated workers are moving down the occupational ladder, performing low-skilled jobs, compared to the pre-recession period. However, this shift may have started prior to the Great Recession and only accelerated during the downturn, suggesting a secular trend in rising skill requirements.

It is not known the extent to which this trend corresponds to employer-driven upskilling or increasing skill requirements within jobs. Moreover, a third potential explanation suggests that what we observe is an increased supply of high-skilled applicants to middle-skilled jobs, with no change in employer requirements or demand. In this case, the phenomenon would represent a secular shift, in response to the increasing supply of college graduates. In order to better understand the mechanisms underlying the observed increase in the number of high-skilled workers employed in middle-skilled occupations, and to sort between the different potential explanations, Daniel Shoag and Alicia Modestino will analyze data from online job vacancy postings from before, during and after the Great Recession. These data would allow them to examine the extent to which highly-skilled people are being matched to middle-skilled jobs. Using occupation-level data, Shoag and Modestino will test whether there is an increase in the education or experience requirements in job postings and whether this increase is linked to the availability of skilled workers.


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