Upskilling: Do employers demand greater skill when workers are plentiful?

The Great Recession and subsequent recovery have been particularly painful for low-skilled workers. From 2007 to 2012, the unemployment rate rose by 6.4 percentage points for noncollege workers while it rose by only 2.3 percentage points for the college educated. This differential impact was evident within occupations as well. One explanation for the differential impact may be the ability of highly skilled workers to take middle- and low-skilled jobs. Indeed, over this period the share of workers with a college degree in traditionally middle-skill occupations increased rapidly. Such growth in skill requirements within occupations has become known colloquially as "upskilling."

It is not clear from employment outcomes alone whether the increasing share of high-skilled workers in middle- and low-skill occupations reflects changing behavior by employers. Few researchers have been able to quantify rising employer requirements due to the difficulty in isolating labor demand from labor supply. In this paper, using a novel dataset of online job vacancy postings, the authors tackle the question of whether the education and experience requirements for job postings have risen between 2007 and 2012, and if so, whether this rise was driven by the state of the local labor market.

Key Findings:

• In bad labor markets, employer requirements rise for both education and experience, even when controlling for time, occupation, and state fixed effects among other covariates. This is true when using alternative measures of labor market slack, and does not appear to be driven by reverse causality or local demand effects.
• Using a natural experiment based on troop withdrawals from Iraq and Afghanistan as a source of exogenous variation, the authors also find significant increases in employer requirements for occupations that typically employ veterans. This result confirms their earlier finding that some portion of the upskilling observed during this period is caused by increases in labor supply rather than changes in labor demand.