A Record Expansions Surprise Winners: The Low-Skilled

"....The Fed’s semiannual monetary policy report released last week noted that the share of people aged 25 to 54 years with at least a college degree who were employed dropped 2.5 percentage points between 2008 and 2010. It then began a steady recovery, and by last year was close to its prerecession peak. For workers with just a high-school diploma or less, the ratio plunged 6 percentage points and didn’t begin a sustained recovery until 2014. Wage data paint a similar picture. Adjusted for inflation, wages of workers with just high school or less initially fell much more sharply than for college-educated workers and then bounced back more strongly, and by last year had recovered all the lost ground. Fed researchers found this has happened in all business cycles since at least 1980. This might be partly due to a long-term shift in demand from less- to more-skilled labor. Yet in individual states where local booms and busts are probably less influenced by those national trends, they found an even starker hit to lower-educated workers in recessions. It takes on average eight years for them to fully recover. The traditional explanation for why some workers are fired first and hired last is that employers hoard their most valued and difficult-to-replace workers. New data offer a more nuanced explanation: employers and workers change their recruitment behavior over the course of the cycle. In a 2016 study, Alicia Sasser Modestino of Northeastern University and two co-authors observed that as unemployment soared between 2007 and 2010, the percentage of job postings requiring a bachelor’s degree on Burning Glass, a website that aggregates job postings, rose more than 10 percentage points. That share then fell over the next four years. The same thing happened with postings requiring at least five years’ experience. This wasn’t because high-skilled occupations or industries had become more important; the authors found that even within the same company posting the same job, hiring criteria became tighter as unemployment rose and easier as it fell. In counties that benefited most from the shale oil-fracking boom, local demand for labor shot up. As a result, manufacturing, agriculture and timber companies, which weren’t benefiting from the fracking boom, still relaxed their education and experience requirements. This suggests that when unemployment is high and labor is plentiful, employers opportunistically “upskill”—they raise the requirements of jobs, for example demanding a bachelor’s degree when an associate’s degree or experience used to be sufficient...."

Grep Ip, "A Record Expansion’s Surprise Winners: The Low-Skilled,"Wall Street Journal, July 10, 2019, https://www.wsj.com/articles/a-record-expansions-surprise-winners-the-low-skilled-11562763602