NCPA - National Center for Policy Analysis

College Grads May Be Stuck in Low-Skill Jobs

March 28, 2013

The recession left millions of college-educated Americans working in coffee shops and retail stores. Now, new research suggests their job prospects may not improve much when the economy rebounds, says the Wall Street Journal.

Underemployment -- skilled workers doing jobs that don't require their level of education -- has been one of the hallmarks of the slow recovery. But in a paper released Monday by the National Bureau of Economic Research, a team of Canadian economists argues that the United States faces a longer-term problem.

  • They found that unlike the 1990s, when companies needed hundreds of thousands of skilled workers to develop, build and install high-tech systems, demand for such skills has fallen in recent years, even as young people continued to flock to programs that taught them.
  • Paul Beaudry, an economist at the University of British Columbia in Vancouver and the paper's lead author, says new technologies may eventually revive demand for advanced skills, but an economic recovery alone won't be sufficient.
  • Using Labor Department data, Beaudry and his coauthors found that demand for college-level occupations -- primarily managers, professionals and technical workers -- peaked as a share of the workforce in about 2000, just as the dot-com bubble was about to burst, and then began to decline.
  • The supply of such workers, meanwhile, continued to grow through the 2000s.
  • The subsequent housing boom helped mask the problem by creating artificially high demand for workers of all kinds, but only temporarily.

Better-educated workers still face far better job prospects than their less-educated counterparts.

  • The unemployment rate for Americans with at least a bachelor's degree was 3.8 percent in February, compared with 7.9 percent for those with just a high school diploma.
  • College-educated employees also tend to earn more and advance more quickly even when they are in fields that don't require a degree.

But as college-educated workers have been forced to take lower-level jobs, they have displaced less-skilled workers, leaving those without degrees with few job options. "You eventually push the lowest skilled out of the market," says Beaudry.

Source: Ben Casselman, "College Grads May Be Stuck in Low-Skill Jobs," Wall Street Journal, March 26, 2013. Paul Beaudry, David A. Green and Benjamin M. Sand, "The Great Reversal in the Demand for Skill and Cognitive Tasks," National Bureau of Economic Research, March 2013.


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