Skills Mismatch in the Labor Market

Abstract

▪ Abstract Researchers across a wide range of fields, policy makers, and large segments of the public believe that the work-related skills of the labor force do not match the requirements of jobs and that this explains a large part of the growth of wage inequality in the United States in the past 20 years. Opinions are divided on whether the trend is driven by workforce developments, such as an absolute decline or declining growth of human capital due to changes in educational attainment or test scores, or employer-side changes, such as accelerating growth of job skill requirements due to the spread of computers and employee involvement techniques. Some believe the problem has grown worse over time. However, the evidence is often more ambiguous and fragmentary than recognized, and the argument overlooks the roles of institutional changes and management's policies toward labor in workers' changing fortunes. Evidence suggests that the growth in educational attainment has decelerated, cognitive skill levels have remained stable, and job skill requirements have gradually increased, but a large portion of employer dissatisfaction relates to effort levels and work attitudes of young people that may represent transitory, life-cycle effects. There is little information on whether job demands are actually exceeding workers' capacities. The absence of a standardized, up-to-date method of collecting information on the actual skill content of jobs is a significant obstacle to answering this question with confidence.