Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?

Modestino, Alicia Sasser, Daniel Shoag, and Joshua Ballance. "Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?" HKS Faculty Research Working Paper Series RWP15-013, March 2015.

Abstract

In the wake of the Great Recession, policymakers and academics have expressed concerns about rising employer skill requirements. Using a large database of online job postings for middle-skill occupations, we demonstrate that employers opportunistically raise education and experience requirements, within occupations, in response to increases in the supply of relevant job seekers. This relationship is robust to numerous tests for potentially confounding factors, is present even within firm-job title pairs, and is consistent with the predictions of a standard employer search model. We further identify this effect by exploiting the natural experiment arising from troop withdrawals in Iraq and Afghanistan as an exogenous shock to local, occupation specific labor supply. Our results imply that increases in the number of people looking for work can account for roughly 30 percent of the total increase in employer skill requirements observed between 2007 and 2010.

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