Is the Demand for Skill Falling?

Paul Beaudry, David A. Green, and Benjamin M. Sand have a paper with an intriguing abstract, which says in part,

Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together.

If true, this would upset nearly everyone’s narrative apple cart, including mine.

14 thoughts on “Is the Demand for Skill Falling?

  1. Not mine, I’ve been arguing against the value of “education” for years. :) As Alex points out, they’re likely confusing skill with the number of years of formal education, a convenient placeholder but dead wrong. This is one of the reasons why online learning will easily bankrupt all colleges and universities, because they are so clueless about how useless their current curricula are.

  2. One would expect the marginal college grad to be less skilled today than 13 years ago. There could also be downeard mobility as well , do to decreasing demand. My guess is both.

    I am reminded of that video with Russ Roberts and that other dude (know his name but am blanking…) discussing the change in mean reversion after recessions the econmy has been experienceing, and its eddect on employment. In the end the only solution they could come up with was more education.

  3. ANY scheme that is measuring “years of school” or “degree” will run into the problem (depending on the major) that I wrote about elsewhere, and which I repeat here:
    ———————————————————-
    I don’t know about any other majors, and my assessment is dated, but inside computer science there is another issue. (I stopped having any contact with this about 2003)

    In CS the ratio of skills between the worst and the best boggles the mind. So there are people with CS degrees who understand computers and software in powerful ways. There are also people with CS degrees who don’t (I was always mystified interviewing them.)

    And that spread can skew compensation – a CS person who is a “real winner” can end up working for some “hot” org where they literally win the lottery. Whereas those on the bottom, well, they end up doing something else.

    So it may (!? may !?) be that the returns to a particular major are uneven.
    (Whereas the disreturns to not finishing high school seem consistently high.)

    ———————
    The above in response to Caplan’s observation about how the return to education crudely adjusted for native ability varies quite a bit by major. (EEs and CS types get paid more than Art History majors – not news…)

  4. There are high earners and low earners, so whatever is causing that spread could be considered skill. Maybe the workplace is moving away from the idealized athletic style competition of engineering and entrepreneurial skill.

    • To elaborate on Clay’s point, we can define skill as what it takes to get ahead, making the continuing high demand for skill a tautology.

      The apparent decline in demand for “skill” (as understood in a commonsense way in light of tradition) can then be seen as a measure of how fast a dynamic economy changes in its demands of the participants. Hunter-gather societies that treasured speed, bravery, and ballistic skill in men yielded to agricultural societies that prized steadiness, prudence, and industry.

      Moving to modern times, I think that there is a wide consensus that academia’s production of convenionally-defined skill has declined gradually over decades, due to lowered standards, grade inflation, the rise in what have been called mickey mouse courses, and the decline of true intellectualism. (As to the last, read the remarks* that got Lawrence Summers thrown out of the academy. )

      It should not be a shock that in addition, the collegiate path may itself be going the way of ballistic talent for the same reason – a weaker fit to the evolving economy – for many if not for all.

      I hope Dr. Kling expands his remarks to tell us what about his own narrative would be challenged by the latter development, if it is true.

      Ken

      * http://www.pbs.org/newshour/updates/science/jan-june05/summersremarks_2-22.html.)

  5. • We will have to think through education–its purpose, its values, its content. We will have to learn to define the quality of education and the productivity of education, to measure both and to manage both.
    • We need systematic work on the quality of knowledge and the productivity of knowledge–neither even defined so far. The performance capacity, if not the survival, of any organization in the knowledge society will come increasingly to depend on those two factors. But so will the performance capacity, if not the survival, of any individual in the knowledge society. And what responsibility does knowledge have? What are the responsibilities of the knowledge worker, and especially of a person with highly specialized knowledge?
    But then we also need to develop an economic theory appropriate to a world economy in which knowledge has become the key economic resource and the dominant, if not the only, source of comparative advantage.
    The function of government and its functioning must be central to political thought and political action. The megastate in which this century indulged has not performed, either in its totalitarian or in its democratic version. It has not delivered on a single one of its promises. And government by countervailing lobbyists is neither particularly effective–in fact, it is paralysis–nor particularly attractive. Yet effective government has never been needed more than in this highly competitive and fast- changing world of ours, in which the dangers created by the pollution of the physical environment are matched only by the dangers of worldwide armaments pollution. And we do not have even the beginnings of political theory or the political institutions needed for effective government in the knowledge- based society of organizations.

    Peter Drucker “The Age Of Social Transformation” The Atlantic Monthly (1994) V.274; No. 5 pp 53-80

  6. I think an important issue that doesn’t get enough attention is the divergence (or lack thereof) of college graduates.

    My guess is the occupational outcomes among college grads has been getting more uneven over time, with the winners doing extraordinarily well, and many of the less accomplished shuffling into jobs that they didn’t need a degree for. So therefore they still look like they’re doing better on paper than non-college grads,

    Whenever I read literature about the effects of college education I get the impression that all graduates are treated as equal units in the human capital equation. My guess is that this is a very large oversight.

    I’d be interested to know of any research that disaggregates labor market outcomes among college graduates. How does lifetime income change as you go down the selectivity gradient? How does this change with majors? Over time? What happens when you account for attrition? When you adjust for debt load?

    I’m being serious. I’ve ALWAYS wondered about this but have not found anything.

    My guess is that if you had these numbers the picture would look much more grim for non-elite universities, and perhaps certain majors within elite universities. Maybe *really* grim.

  7. Are skill requirements falling or have we reached a plateau in the information economy transition. Many jobs since 1980 have suddenly required a “skilled” college graduate compared to older incumbents. Was that really an over all skill change or was the college degree a proxy to bring in more computer literate candidates while avoiding discrimination lawsuits? However, 20 years on, the early Boomers are retiring out and the early “computer-literate” hires are now the old guys. Computer literacy is now a given rather than a rarity.

    The same with the skill needs associated with the information revolution. Every company suddenly wanted “computer-literate” for which college education was a proxy or at least an indicator of ability. Now, you are either computer-literate or you are unemployable except in manual low-skill jobs. Also, as the computer took over information processing in the office, it removed the need for “skilled” appliers of company policy to claims, etc. If you worked off a decision tree, a computer could do your job.

    Where we may see a problem is that many of the “skilled” recipe jobs were training grounds for the really skilled adjudicator who applies actual judgement. As those bosses age out, companies may find they don’t have a deep pool to select the employee with demonstrated judgement to the real skilled positions.

  8. Short answer: no. We aren’t accessing skills very well in the present but that’s too much explanation for a simple comment. However, when we do finally get free markets in knowledge and skills, perhaps one day we will also have the demographic improvement of “just in time” knowledge skills use wherever it is actually needed (instead of today’s gridlocked knowledge use in the cities), not unlike the just in time physical inventories of the present. Healthcare example – so that people can be tended to by local citizens as they age, instead of having to be isolated in city hospitals far from family, when faced with growing health issues.

  9. It’s called rising productivity. It’s been around for a while now. In 1880, a skilled glassblower could make a good living blowing bottles. By 1920, this was done by a bottle machine. Another skilled job eradicated. It was like something out of Adam Smith’s pin making example. Why have a skilled craftsman who can make a pin from scratch when you could have three less skilled craftsmen each making a part of the pin and putting it together? Better yet, get a totally unskilled worker operating a pin making machine. Even in the 18th century economists realized that eliminating skills was a key to economic growth.

    So, we had the modern industrial revolution, from 1870 to 1920, that changed the way we live. It led to the Great Depression because a 2-3 order of magnitude productivity increase left a lot of people jobless and unable to purchase much of anything. We’ve been going through another revolution integrating computers into our system, and that’s eliminated even more skills and further increased productivity. How quickly can a paralegal search 50,000 pages of legal documents? How quickly can a computer? As in the 1930s, we couldn’t come up with an excuse to pay people more, so now we’re in a depression again. Another generation of skilled workers are unemployed.

    When does the process end? Who cares? Why should it? It’s harmless as long as we can come up with excuses to pay people to buy the system’s output. If education, providing it and acquiring it, can serve as an excuse, then I’m all for it. (I’d rather not see a military solution and I expect it isn’t as likely. Military productivity has been rising as well.)

  10. I have posted comments about this many times. Some blogger will say “The unemployment rate for college educated workers is still low but is high for the less educated so we need to educate more people.” and I will point out that the educated workers are just better workers and so are pushing out the low skilled workers. Less that half of college grads are getting jobs that require the knowledge that they got in college.

  11. Their boom-bust pattern seems to fit reasonably well with your PSST framework. (Perhaps their analysis doesn’t fit with the way you thought things would settle out.)