Job Gains in Texas and Losses in Caifornia and Florida

Human Capital: Sliding Down the Occupation Ladder

by Elaine Schwartz    •    May 15, 2013    •    636 Views

Does your barista have a Ph.D?

When people have too much education for their job, the reason might be “cascading.” Explained by 3 researchers in a recent paper, the cascading story starts with the tech boom. During the 1990s, as tech firms popped up everywhere, so too did the demand for highly educated human capital.

Fast forward to 2000 when the tech bubble bursts and these highly educated individuals have to job hunt. Add the flow of new college grads and you have too many people chasing too few jobs that require their cognitive skills. The result? Highly educated individuals are doing jobs that require less knowledge. On the occupation ladder, they are cascading downward.

Although most of the cascading research is bleak, the good news is that more people want to become teachers. After having lost many of its gifted and talented to other occupations like the law and medicine, the teaching profession is again more attractive. With a 17% acceptance rate, Teach for America has become as selective as competitive colleges.

Our bottom line? Cascading might represent a reason that the unemployment rate has dropped so slowly in the US. Having hit a high of 10% during October, 2009, the unemployment rate was still 7.5% during April. The authors of  the cascading study believe that less demand for highly skilled tech workers is one reason. They agree that manufacturing is declining and we have had structural and cyclical unemployment. Also though, they suggest that cascading is creating unemployment and underemployment when it “crowds out” lesser educated workers.

Sources and Resources: For more discussion on cascading, this Freakonomics podcast was interesting while the paper on which it is based, “The Great Reversal in the Demand for Skill and Cognitive Tasks” provides all of the details and the math.

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