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Downskilling: changes in employer skill requirements over the business cycle

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  • Modestino, Alicia Sasser
  • Shoag, Daniel
  • Ballance, Joshua

Abstract

Using a novel database of 82.5 million online job postings, we show that employer skill requirements fell as the labor market improved from 2010 to 2014. We find that a 1 percentage point reduction in the local unemployment rate is associated with a roughly 0.27 percentage point reduction in the fraction of jobs requiring at least a bachelor's degree and a roughly 0.23 percentage point reduction in the fraction requiring five or more years of experience. This pattern is established using multiple measures of labor availability, is bolstered by similar trends along heretofore un-measured dimensions of skill, and even occurs within firm–job title pairs. We further confirm the causal effect of labor market tightening on skill requirements using a natural experiment based on the fracking boom in the United States, as an exogenous shock to the local labor supply in tradable, non-fracking industries. These industries are not plausibly affected by local demand shocks or natural gas extraction technology, but still show fewer skill requirements in response to tighter labor markets. Our results imply this labor market-induced downskilling reversed much of the cyclical increase in education and experience requirements that occurred during the Great Recession.

Suggested Citation

  • Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2016. "Downskilling: changes in employer skill requirements over the business cycle," Labour Economics, Elsevier, vol. 41(C), pages 333-347.
  • Handle: RePEc:eee:labeco:v:41:y:2016:i:c:p:333-347
    DOI: 10.1016/j.labeco.2016.05.010
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    Cited by:

    1. Shrestha, Rashesh & Coxhead, Ian, 2018. "Export boom, employment bust? The paradox of Indonesia's displaced workers, 2000-14," CEI Working Paper Series 2018-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    2. Christopher Huckfeldt, 2018. "Understanding the Scarring Effect of Recessions," 2018 Meeting Papers 1207, Society for Economic Dynamics.
    3. Clifford, Robert & Shoag, Daniel, 2016. ""No More Credit Score": Emplyer Credit Check Bans and Signal Substitution," Working Paper Series 16-008, Harvard University, John F. Kennedy School of Government.
    4. José A. Azar & Ioana Marinescu & Marshall I. Steinbaum & Bledi Taska, 2018. "Concentration in US Labor Markets: Evidence From Online Vacancy Data," NBER Working Papers 24395, National Bureau of Economic Research, Inc.
    5. Grinis, Inna, 2017. "The STEM requirements of "non-STEM" jobs: evidence from UK online vacancy postings and implications for skills & knowledge shortages," LSE Research Online Documents on Economics 85123, London School of Economics and Political Science, LSE Library.
    6. Brad Hershbein & Lisa B. Kahn, 2018. "Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings," American Economic Review, American Economic Association, vol. 108(7), pages 1737-1772, July.
    7. Clifford, Robert & Shoag, Daniel, 2016. "“No more credit score”: employer credit check bans and signal substitution," Working Papers 16-10, Federal Reserve Bank of Boston.
    8. repec:zbw:ifweej:201927 is not listed on IDEAS
    9. Pater, Robert & Szkola, Jaroslaw & Kozak, Marcin, 2019. "A method for measuring detailed demand for workers' competences," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 13, pages 1-30.

    More about this item

    Keywords

    Labor demand; Skills; Vacancies; Unemployment; Firm behavior;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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