the broader V-shaped pattern in the underemployment rate over the past two decades is also consistent with new research arguing that there has been a reversal in the demand for cognitive skills since 2000. According to this research, businesses ramped up their hiring of college-educated workers in an effort to adapt to the technological changes occurring during the 1980s and 1990s. However, as the information technology revolution reached maturity, demand for cognitive skill fell accordingly. As a result, during the first decade of the 2000s, many college graduates were forced to move down the occupational hierarchy to take jobs typically performed by lower-skilled workers.
They refer to a paper by Beaudry, Green, and Sand.
This is an important observation. Some possible explanations:
1. The empirical finding is mistaken. If you do the analysis correctly, the demand for cognitive skills has not reversed. Perhaps jobs that are classified as not requiring a college degree in fact have become much more cognitively challenging. [note: I am not claiming that the empirical analysis is incorrect. I just want to include that as a possibility.]
2. Assume that the distribution of jobs in terms of skill requirements has remained approximately fixed. Assume, perhaps reasonably, that college selects students on the basis of cognitive ability, but it does nothing to change the distribution of skills or ability. As more students go to college, this means more low-ability students go to college, and they wind up in the same jobs that they would have obtained without going to college.
3. There has been an actual deterioration in the quality of college education, at least relative to the needs of employers. An individual who graduated in 1995 was more likely to have gained skills in writing and thinking than if that same individual had graduated in 2005.