Working Paper: NBER ID: w18901
Authors: Paul Beaudry; David A. Green; Benjamin M. Sand
Abstract: What explains the current low rate of employment in the US? While there has been substantial debate over this question in recent years, we believe that considerable added insight can be derived by focusing on changes in the labor market at the turn of the century. In particular, we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together. In order to understand these patterns, we offer a simple extension to the standard skill biased technical change model that views cognitive tasks as a stock rather than a flow. We show how such a model can explain the trends in the data that we present, and offers a novel interpretation of the current employment situation in the US.
Keywords: labor market; employment; cognitive tasks; skill demand
JEL Codes: J21; J31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reversal in the demand for cognitive tasks (J29) | Decline in employment rates for highly educated workers (F66) |
| Reversal in the demand for cognitive tasks (J29) | High-skilled workers moving down the occupational ladder (J62) |
| High-skilled workers moving down the occupational ladder (J62) | Lower-skilled workers pushed further down the occupational ladder (F66) |
| Lower-skilled workers pushed further down the occupational ladder (F66) | Potentially out of the labor force altogether (J69) |
| Reversal in the demand for cognitive tasks (J29) | Deskilling process (F66) |
| Technological change (O33) | Changes in employment patterns (J63) |
| Demand for cognitive tasks (J29) | Wage structures for high- and low-skilled workers (J31) |