Beaudry, Green, and Sand write,
the first object of this paper will be to document that the demand for cognitive tasks has actually been declining since 2000. Such a decline in demand has had, and continues to have, a direct impact on more skilled workers, but we go on to show that it has likely had a substantial impact on less skilled workers as well. In particular, we argue that in response to the 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. This process had been going on since 2000, but, as argued in earlier papers, the housing boom between 2003 and 2006 masked some of the effects which only become fully apparent after the financial crisis.
Pointer from Mark Thoma (with a couple of clicks in between).
If your main evidence for de-skilling is that people with college education are in jobs that you would not think require college degrees, then there might be another story. That is, credentials do not prove cognitive ability. In fact, we may have observed an increase in the proportion of people attending college who are not really college material and in the number of colleges producing graduates with only high-school level skills. These people would wind up in jobs not requiring great cognitive ability.
Your PSST framework seems helpful here. There will naturally be a dynamic between labor supply and demand where markets will tend toward ever changing equilibriums on many different dimensions. After all, we don’t have millions of unemployed blacksmiths or millions of unfilled job openings for people who can teleport. So, any study that purports to measure some labor mismatch over a long period of time on a single dimension is bound to end up mostly reflecting the shortcomings of the specifications of the study itself.
One piece of evidence that is difficult to square away with your alternative story is what Beaudry et al call “the increase in returns to education over the
period.” I also buy that many college degrees increasingly signal very little, but I am not sure how to reconcile this with the finding that the general trendline in returns to education is up.
Is it mostly about cognitive ability or more of a mismatch between skills and market demand? With so many more people going to college, too many of them are not choosing their fields of study wisely.
Even graduates of STEM fields need to make sure that their is a demand for what they are studying.
First link broken. Here is a site for the paper.
It’d be nice to see an analysis based on cognitive metrics instead of educational credentials. A lot of economic studies out there use ‘human capital’ as a variable, and just use ‘years of schooling’ as the metric, which was always a pretty awful approach, and is now even worse than it used to be.
Still, there are other, related stories one could tell too. Perhaps some fields are becoming increasingly like that described in ‘Average Is Over’. Instead of well-matched, one-candidate per open spot (like the Medical Residency system tries to achieve), they are more like winner-take-all tournament markets full of a few superstar winners, with many losers.
Sports is the obvious example, and of course you see many occupations full of people with much more athletic ability than they need to perform their job. It’s not that the demand for athletic prowess has declined – sports are as popular as ever – but that there are only so many spots at the top, and so those that don’t make it have to settle for some other task that doesn’t focus on their main talent as their comparative advantage.
And consider PhD’s. The university system churns out far more PhD’s per year than the turnover rate, or the number of open academic positions there are now, or that anyone expects there to be in the future. That creates a kind of Malthusian environment where the top candidates from the top schools can’t find employment in those same schools, and begin to trickle down the hierarchy. PhD’s at mid-level schools find it hard to get hired at top or middle places, and at the low-end find it hard to get hired at all.
Many of them will end up doing jobs that don’t really leverage their learning and investments of time and effort, because of this mismatch between contestants and the size of the winner’s circle, and the perception of a huge and discontinuous reward if one wins that lottery.
An over-abundance of people enter into tournament markets like these when they are uncertain or over-optimistic about their chances of prevailing, but know they cannot prevail without jumping through all the hoops.
I’m not going to say this is a ‘market failure’, or even rely on explanation of asymmetric information, but it does seem that far too many people are far too hopeful about their prospects given the asymmetry in numbers before and after the gauntlet. Maybe it’s the Dunning-Kruger effect, hard to say. But no one seems to have much incentive to discourage the most likely time-wasters from wasting their time, and I figure that the same goes for all levels of education these days.
AKA the rise of the ZMP worker.
From footnote 1: “Cognitive task occupations consist mainly of managers, professionals and technical workers, and are seen as complementary to Information Technology capital and the organizational forms that go with it.”
IT has also replaced/reduced the cognitive skills required for many manager, professional and technical positions. However, as this happened the computer/IT skills of the new hire became critical and moving the position requirements to a higher ed credential was the way in the 1990s to get applicants with computer savvy to learn the apps that were taking over the cognitive skills.
Example: Prior to the mid to late ’90s, the estimator for say a shipyard would have most likely been a guy who worked his way up through the shops and not generally one who had a college degree. But by the late ’90s, most such operations were using estimation software to plan their jobs. The computer took over a go bit of the knowledge and decision the estimator did prior with the added benefit of being able to run scenarios to find where slight misjudgments could eat the whole profit margin.
Now, your 50-60 yr old estimator in the 1990s was probably not big on computers. So the company hires a college grad to learn the software and eventually the old guys retire out. But now, to hire new estimators the job “requires” a college degree. Because who is going to risk having to explain losses due to hiring a smart high school grad instead of a college grad. (Nobody ever got fired for buying IBM computers) And you no longer reach down into the shops to find your estimator.
Computer skills of important but learning software is not as cognitively challenging as estimating a job using pencil and paper where experience is used to identify the critical elements and add in the needed buffers.
“Increasing returns on eduction” is just a reflection of the fact that smart+hard-working people who are bound to be valuable got a college degree like they’re supposed to (and an *elite* degree has some proof-of-character value, whether or not the skills taught are useful). If it becomes common enough for the intelligent+conscientious set to opt out of college then you will stop seeing increasing returns on education (under the “education is teaching few useful skills” hypothesis).
Then ask yourself, so doesn’t a company simply hire more smart high graduates to pay less life time wages? There is nothing stopping companies from doing this. I have worked in the same office since 1997 and have seen former jobs that people with HS diplomas could do become a college graduate position.
Why?
1) Companies hate spending money on training employees.
2) It is increasing more expensive to have a worker that is not contributing and fail in a position.
3) In a productive job, there are a lot more tasks (say writing e-mails) that college works help
4) India and China outsourcing has killed company ‘Minor Leagues’ where there are no grunt positions that has a lot of on the job training.