Downskilling: Changes in Employer Skill Requirements over the Business Cycle Downskilling: Changes in Employer Skill Requirements over the Business Cycle

By Alicia Sasser Modestino, Daniel Shoag, and Joshua Ballance

The weakness of the U.S. labor market during the period following the Great Recession remains poorly understood. Two years after the official end of the Great Recession, the unemployment rate still hovered around 8 percent, although employers reported more vacant positions. This shift in the relationship between unemployment and vacancies, known as the Beveridge curve, has highlighted the need to focus not just on the number of vacancies, but also on their composition and skill requirements.

Explanations for this shift have been explored, including a deterioration in the matching/hiring process in the economy as well as changes in the composition and motivation of the unemployed. More recently, the literature has focused on a decrease in “recruitment intensity” per vacancy during recession, whereby employers behave in ways that can influence the rate of new hires, such as changes in advertising expenditures, screening methods, hiring standards, and compensation. For a given vacancy-to-unemployment ratio, a lower recruiting intensity per vacancy would lower the job fill rate, shifting the Beveridge Curve upward, as observed after the Great Recession. Yet to date evidence of direct measures of recruitment intensity across employers has been limited.

The authors directly measure an important channel along which recruitment intensity may have shifted during the Great Recession—the skill requirements employers use to screen candidates when filling a new vacancy. Previous work examining this dynamic found that employers raised education and experience requirements within occupations, and even within firm and job titles. This growth in skill levels within occupations has colloquially become known as upskilling. In this paper, the authors build on their earlier study of the Great Recession, by analyzing skill trends during the subsequent recovery.

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