Labor Market Conditions, Skill Requirements and Education Mismatch

Fraser Summerfield

CLSSRN working papers from Vancouver School of Economics

Abstract: This paper shows that changes in the skill requirements of jobs are one way by which economic downturns affect job match quality. In doing so this paper makes two contributions to the literature. The first contribution is to document a stylized fact about the cyclicality of skill requirements (tasks) for newly formed jobs. Relating local unemployment rates in Canadian data, to skill requirements generated from the Occupational Information Network (O*NET) database, I show that the demand for manual skill requirements is countercyclical. This stylized fact shown to be consistent with the predictions of a job search models with heterogeneous workers and vacancies. In this framework, firms increase the share manual job vacancies during downturns because they are less costly to post and fill. The second contribution is to show that the cyclicality of skill requirements, rather than economic conditions themselves, contribute to the incidence of overqualification. Estimates using various measures of overqualification confirm that changes in the skill requirements of newly formed jobs can account for much of the relationship between labor market conditions and job match quality. This empirical finding is also consistent with the model, where the share of overqualified workers varies with economic conditions partially because of corresponding changes in the type of job vacancies.

Keywords: Mismatch; Job Search; Overeducation; Skill Demand; Business Cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J24 J63 J64 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2014-04-28, Revised 2014-04-28
New Economics Papers: this item is included in nep-dge, nep-lab, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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