Skilled jobs are declining – study

By Time of article published Jul 1, 2013

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Peter Orszag

It’s a parent’s nightmare: shelling out big money for college, then seeing the graduate unable to land a job that requires high-level skills. This situation may be growing more common, unfortunately, because the demand for cognitive skills associated with higher education, after rising sharply until 2000, has since been in decline.

So concludes new research carried out by economists Paul Beaudry and David Green of the University of British Columbia and Benjamin Sand of York University in Toronto.

This reversal in demand has caused high-skilled workers to accept lower-level jobs, pushing lower-skilled people even further down the occupational ladder or out of work altogether.

If the researchers are right (which is not yet clear), the consequences are huge and troubling – and not just for college graduates and their parents.

Let’s start with some basic facts. There have always been some graduates who wind up in jobs that don’t require a college degree. But the share seems to be growing.

In 1970, only one in 100 taxi drivers and chauffeurs in the US had a college degree, according to an analysis of labour statistics by Ohio University’s Richard Vedder, Christopher Denhart and Jonathan Robe. Today, 15 out of 100 do.

It’s hard to believe this is because the skill required to drive a taxi has risen substantially since 1970.

If anything, GPS technology may have had the opposite effect.

Similarly, in 1970, only about 2 percent of fire fighters had a college degree, compared with more than 15 percent now, Vedder and his colleagues found. And, according to research by economists Paul Harrington and Andrew Sum of Northeastern University, about one in four bartenders has some sort of degree.

Beaudry and his colleagues say that such change has been driven by a decline in the demand for highly skilled work – the opposite of the conventional wisdom about such demand.

The employment rate in “cognitive” occupations – managerial, professional and technical jobs – increased markedly from 1980 to 2000, their research found, but it has since stagnated, even as the supply of skilled workers has continued to grow.

What has changed? One possibility is that the effects of a globalising workforce are creeping up the income scale. Many jobs that once required cognitive skill can be automated.

Whatever the explanation, the Beaudry team argues that an excess of skilled workers has led them into the “routine” job market – such as sales and clerical jobs – reducing wages there and pushing workers with less skills into “manual” jobs in construction, farming and so on.

The still strong earnings premium for graduates strongly suggests that the demand for skill has not collapsed.

Beaudry and his colleagues argue that while wages for jobs requiring cognitive skills have declined, the shift of high-skilled workers into those jobs has depressed wages for manual workers even more.

That’s a provocative argument.

In any case, the findings will do little to calm the nerves of graduates who are anxious to find jobs.

The cold comfort I can offer is this: Going to college may still be worthwhile – if not to be sure of qualifying for skilled jobs, then at least to avoid the even worse prospects faced by those who don’t get a degree. – Bloomberg

Peter Orszag is vice-chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup and a former director of the office of management and budget in President Barack Obama’s administration.

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