Job Polarization, Skill Mismatch and the Great Recession

Abstract

This paper shows that job polarization has a persistent negative effect on employment opportunities, labor mobility and skill-to-job match quality for mid/low-skilled workers, in particular during downturns. I introduce a model generating an endogenous mapping between skills and jobs, that I estimate to match solely occupational dynamics during the Great Recession, a major episode of polarization in the US economy. Yet, this is sufficient for the model to replicate well the reallocation patterns of all workers on the job ladder and the mismatch dynamics observed in the data. Comparison with the planner solution reveals that 1/4 of mismatches is efficient and attenuates polarization and unemployment over the cycle.

No Longer Qualified? Changes in the Supply and Demand for Skills within Occupations

“…However, jobs that require relatively high computer usage, including occupations in the fields of science and healthcare, experienced large increases in wages at the upper end of the wage distribution relative to occupations involving less computer usage (Bessen 2014). Similarly, states that experienced greater job polarization during the recession-defined as a loss of routine middle-skill jobs compared to low-skill (manual) and high-skill jobs-also experienced a greater mismatch in educational qualifications during the recession and through the end of 2013, as evidenced by workers moving down the occupational skill ladder relative to what would be expected given their higher educational attainment (Zago 2018). Over the longer run, structural labor market polarization may manifest as upskilling within some occupations, as employers raise skill requirements, and as educational overqualification in other job categories, as former middle-skill workers are forced to take jobs in the low-skill sector.…”