A search for evidence of skill mismatch in the aftermath of the great recession

Abstract

Using matched individual-level data from the Current Population Survey, this article identifies a significant trend shift upwards in schooling among prime-age labour force leavers following the 2008–2009 recession. However, further evidence discredits skill mismatch as an explanation for that trend shift.

Keywords:

• skill mismatch
• great recession
• labour force participation
• labour supply
• educational attainment

JEL Classification:

• J24
• J21
• J22
• E24

Acknowledgements

The views expressed in this article are those of the authors and do not necessarily represent those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. This article has benefited from comments and suggestions of Christopher Foote, Steve Hipple, Jim Nason, John C. Robertson and Didem Tuzeman.

Notes

¹ The use of year-to-year flows removes concerns of seasonality and captures longer term changes in behaviour. However, it is not known what took place during the year between observations, merely that the person was in the labour market a year ago (either employed or unemployed) and not in the labour market the next, and the reason for nonparticipation.

² The BLS defines the other category as individuals with transportation and/or childcare issues that prevent an individual from working as well a number of individuals with undefined reasons.

³ The June 2012 end point of our data allows our four-year window (±2 years) to capture changes in behaviour a full year post recession. Time windows of 2, 4 and 6 years all produce fairly consistent results. Test statistics calculated between July 2010 and June 2011 make use of less than 2 years of data beyond .