Skills mismatch refers to a labor market condition in which a significant proportion of the labor force is either over- or underqualified relative to the skill levels of jobs offered by employers. Job seekers and workers affected cannot obtain jobs that match their skill level at the level of pay and terms of employment that previous labor market conditions, educators, or their own conceptions of the labor market had led them to expect.
In the case of an overeducated workforce or skills glut, a larger than usual group of better-educated workers will (a) take jobs traditionally held by less-educated workers, (b) accept long periods of unemployment while searching or hoping for a job closer to their education level, or (c) accept such a job under worse terms of employment than traditionally considered normative (e.g., lower pay, part-time or temporary basis). Even though the total number of mismatched workers may remain stable over time, individuals may move into and out of this group, as some people usually succeed in eventually finding jobs that better match their skill level and new graduates enter the labor market.
In the case of undereducation or skills shortage, less-skilled workers bear the burdens of unemployment, underemployment, or declining terms of employment, while higher-skill jobs may remain vacant for long periods because higher-skilled workers are relatively scarce. This skills mismatch can lead to simultaneously high unemployment among the less skilled and persistent vacancies in high-skill jobs or to the absorption of unemployed less-skilled workers only after their wages decline sufficiently to induce employers to hire them.
Skills mismatches are medium- or long-term conditions because of the time lag required for the educational composition of the workforce to readjust to the changing demand for skill. Mismatch situations are different from frictional unemployment, which results from imperfect information in the labor market that delays well-matched job seekers and employers from finding one another in the short term. Skills mismatches also differ from cyclical unemployment, which reflects declines in the overall demand for labor during general business downturns.
Skills Mismatch as a Social Problem
In the 1970s, observers believed that U.S. workers were overeducated relative to the number of jobs that could use their high levels of education. This partly reflected the rapid rise in college attendance during the 1960s, some of which was a temporary effect of college student deferments for the military draft during the Vietnam War. The rapid increase in the supply of college graduates depressed the size of their earnings advantage relative to high school graduates. In addition, various social science theories, such as signaling theory, credentialism, class reproduction theory, and deskilling theory argued that educational attainment tended to rise faster than the technical demands of jobs, because of either inflated hiring standards or reductions in the skill content of jobs. Analysts expressed concern that job challenges were not keeping up with rising education levels, contributing to declining job satisfaction.
With the exception of cultural capital theory, scholarly and policy thinking shifted in the opposite direction in the 1980s and 1990s, sometimes dramatically. More people believed that occupational, industrial, and technological shifts were transforming the United States into a postindustrial or information economy, resulting in a large group of undereducated workers. Poverty researchers argued that these structural changes limited opportunities for upward mobility among the urban underclass by widening the gap between the growing cognitive demands of available jobs and the relatively low skills of poor minority job seekers. The geographic redistribution of jobs to areas outside of central cities and the barriers to residential mobility among the poor further inhibited the ability of less-educated workers to find jobs that matched their qualifications. Most labor economists argued that the sharp rebound in the college-high school wage differential in the 1980s was evidence that the unprecedented rise in earnings inequality during this period was due to the growth in skill demand outrunning the growth in supply. Deepening concern with the state of U.S. education, which began with the economic competitiveness crisis in the early 1980s and continues today, also rests on the belief that the labor force does not have the skills required for the new economy. Economists, policymakers, and, increasingly, other social scientists share the view that inadequate skills and education are the main causes of rising earnings inequality and other labor market problems.
Problems With the Skills Mismatch Hypothesis
Despite its status as conventional wisdom, the view that the United States suffers from a skills shortage or mismatch has not gone unchallenged. Critics note that with the exception of a few occupations, such as nursing or fast-changing computer-related fields, the exact skills that are in short supply are rarely specified. Also rarely specified is whether skills mismatch is a highly general problem or restricted to narrower groups, such as the most disadvantaged. Employer complaints sometimes seem to be more about workers’ low effort and motivation rather than their cognitive skills, particularly when referring to young workers, who are generally more computer-literate than are more experienced workers.
Scores on nationally standardized tests for high school students and college applicants have been stable or rising since the early 1980s, with some significant gains for minorities, and a growing percentage of young people graduate from college. Several studies of trends in occupation-based measures of skill requirements have found growth but not the dramatic acceleration in the cognitive demands of jobs over time that would explain the growth in inequality since the late 1970s. In fact, inequality growth moderated since the end of the 1980s despite continuing rapid advances in computer technology. In addition, since the mid-1990s, the labor market absorbed large numbers of low-skilled former welfare recipients at prevailing wage rates that exceeded the minimum wage and continued to draw greater numbers of even lower-skilled immigrants from abroad, suggesting that the number of low-skill jobs is not shrinking as rapidly as often claimed.
However, opportunities for less-skilled workers are concentrated increasingly in the lower-wage service sector rather than manufacturing. Critics of skills mismatch theories believe that this and other structural changes in labor markets, such as declining unionization, outsourcing, employer pay policies, and declining real minimum wage, are more important explanations of inequality growth than the failure of individuals’ human capital to keep pace with technological change.
- Handel, Michael J. 2003. “Skills Mismatch in the Labor Market.” Annual Review of Sociology 29:135-65.
- Harrison, Bennett. 1994. Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility. New York: Basic Books.
- Holzer, Harry J. 1999. What Employers Want: Job Prospects for Less Educated Workers. New ed. New York: Russell Sage.
- Howell, David R. and Edward N. Wolff. 1991. “Trends in the Growth and Distribution of Skills in the U.S. Workplace, 1960-1985.” Industrial and Labor Relations Review 44:486-502.
- Murnane, Richard J. and Frank F. Levy. 1996. Teaching the New Basic Skills. New York: Free Press.
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