Tag Archives: The great reversal in the demand for skill and cognitive tasks

Higher Education: Or Should I Just Keep Chasing Pavements?

And for those who don’t get the pop culture reference, ‘chasing pavements’ is the British singer Adele’s metaphor for a fruitless pursuit or forlorn hope.

Should I give up,
Or should I just keep chasing pavements?
Even if it leads nowhere,
Or would it be a waste?
Even If I knew my place should I leave it there?
Should I give up,
Or should I just keep chasing pavements?
Even if it leads nowhere

Do we live in a different economic world? Or was the credit crisis of 2007-09 just an aberration: an anomalous blip on the way to future prosperity? It’s a taxing question for everyone, but especially those just starting adulthood and thinking of a future career.

The old certainty, pre-credit crisis, was that higher education was a reliable stairway to greater employability and higher income. But in the last couple of years, a sea of student debt and rising graduate unemployment have made many question whether past returns to education still hold.

On Monday, a disquieting NBER study by three Canadian economists entitled “The Great Reversal in the Demand for Skill and Cognitive Tasks” was published that suggests we have entered a ‘new normal’ for education too. From the Abstract:

….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.

And if you think that wasn’t bad enough:

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.

The paper starts with a sweep through the employment data that shows the worsening employment picture for all U.S. workers (click for larger image):

Employment Rate with Fitted Trend jpeg

Nothing new here. Indeed, it gives me an excuse to put up Calculated Risk’s iconic  employment chart (click for larger image).

Calculated Risk Job Losses jpeg

Note that the workforce continues to expand in the U.S. due to demographic trends, so the increasingly slow job recoveries from recessions translate into lower overall employment rates. What is new here, however, is that the paper’s authors argue that circa 2000 the demand for cognitive—aka high skilled, high education jobs—shrank. Worse, this coincided with an influx of highly educated new graduates who had been reared for years on the mantra (delivered by their parents, teachers and politicians of both the left and right) that staying on at college was the only way to get ahead. Continue reading