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Downskilling: Changes in Employer Skill Requirements over the Business Cycle

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  • Sasser Modestino, Alicia

    (Northeastern University)

  • Shoag, Daniel

    (Harvard University)

  • Ballance, Joshua

    (Federal Reserve Bank of Boston)

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 2010-2014. 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 5 or more years of experience. This pattern is established using multiple measures of labor availability, is bolstered by similar trends along heretofore unmeasured 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 U.S. as an exogenous shock to 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

  • Sasser Modestino, Alicia & Shoag, Daniel & Ballance, Joshua, 2016. "Downskilling: Changes in Employer Skill Requirements over the Business Cycle," Working Paper Series 16-014, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:16-014
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christopher Huckfeldt, 2018. "Understanding the Scarring Effect of Recessions," 2018 Meeting Papers 1207, Society for Economic Dynamics.
    2. 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.
    3. Azar, José & Marinescu, Ioana E. & Steinbaum, Marshall & Taska, Bledi, 2018. "Concentration in US Labor Markets: Evidence from Online Vacancy Data," IZA Discussion Papers 11379, Institute of Labor Economics (IZA).
    4. 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.
    5. 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.
    6. 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.
    7. repec:zbw:ifweej:201927 is not listed on IDEAS
    8. 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.
    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

    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
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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