Downskilling: Changes in Employer Skill Requirements Over the Business Cycle

46 Pages Posted: 7 Sep 2016

See all articles by Alicia Modestino

Alicia Modestino

Northeastern University

Daniel Shoag

Harvard University - Harvard Kennedy School (HKS)

Joshua Ballance

Federal Reserve Banks - Federal Reserve Bank of Boston

Multiple version iconThere are 2 versions of this paper

Date Written: February, 2016

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 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 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.

Keywords: labor demand, skills, vacancies, unemployment, firm behavior

JEL Classification: D22, E24, J23, J24, J63

Suggested Citation

Modestino, Alicia and Shoag, Daniel and Ballance, Joshua, Downskilling: Changes in Employer Skill Requirements Over the Business Cycle (February, 2016). FRB of Boston Working Paper No. 16-9, Available at SSRN: https://ssrn.com/abstract=2835901

Alicia Modestino (Contact Author)

Northeastern University ( email )

220 B RP
Boston, MA 02115
United States

HOME PAGE: http://www.northeastern.edu/cssh/faculty/alicia-sasser-modestino

Daniel Shoag

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Joshua Ballance

Federal Reserve Banks - Federal Reserve Bank of Boston

600 Atlantic Avenue
Boston, MA 02210
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
90
Abstract Views
515
Rank
307,910
PlumX Metrics