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

This paper demonstrates that downturns can affect job match quality by influencing job tasks. Cognitive and manual task shares and education-based overqualification measures are generated from Canada’s Labour Force Survey and the O*NET database. Manual tasks are shown to be countercyclical among newly formed jobs. Task measures also displace the predictive power of labor market conditions for the probability of overqualification. 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 overqualification by 3.5 percentage points. A policy experiment shows that increased unemployment benefits may not reduce overqualification.