Matching Skill and Tasks: Cyclical Fluctuations in the Overqualification of New Hires

Abstract

This paper demonstrates that downturns can affect job match quality by influencing job tasks. Cognitive and manual task shares and education-based over qualification measures are generated from Canada’s Labour Force Survey and the O*NET database. Manual tasks are shown to be counter cyclical among newly formed jobs. Task measures also displace the predictive power of labor market conditions for the probability of over qualification. The paper develops and calibrates a search model with two-sided heterogeneity that can account for these empirical findings. Predictions differ from prior models because production processes and vacancy posting costs differ. A single percentage point increase in unemployment is accompanied by an increase in the share of manual task vacancies by 6 percentage points, leading to an increase in over qualification by 3.5 percentage points. A policy experiment shows that increased unemployment benefits may not reduce over qualification.