Handel, Michael J. (2005). Worker Skills and Job Requirements: Is There a Mismatch? Reviewed by Cynthia Cameros, Johns Hopkins University

Handel, Michael J. (2005). Worker Skills and Job Requirements: Is There a Mismatch? Washington, D.C.: Economic Policy Institute. Pp. 94 Price: $11.95 (papercover)   ISBN 1-932066-16-0 Reviewed by Cynthia Cameros Johns Hopkins University October 25, 2006 Worker Skills and Job Requirements: Is There a Mismatch? is a policy-oriented study on the skills mismatch debate, which is intended for academics, policymakers, and the general public. Michael J. Handel cautions that questions about the skills mismatch debate cannot be answered because of the insufficiency and inconsistency of the data. But Handel’s call for more standardized skills data sidesteps more immediate methodological issues in the skills mismatch debate. The preliminary issue to be decided is how mismatch between firms and workers is measured. Should mismatch be measured using a Beveridge curve, equilibrium unemployment rate, demand/supply wages? Handel hooks up the skills cart with a call for standardized data about what skills are desired by firms and what skills workers have, but he has not decided which horse to pull the cart. In the first chapter, “Skills mismatch as a social problem,” Handel begins hooking up the skills cart. His definition of skills mismatch focuses exclusively on skills. “The term skills mismatch can describe situations in which workers’ skills exceed or fall short of those employers seek.” (p. 3) He reviews the history of credentialist, signaling, and queuing, deskilling, post-industrial, mismatch, and demand for skill theories in which mismatch is one of several explanations for skills levels. (pp. 3-4) To his credit, Handel begins to diagnose the problems with the skills mismatch model: “In sum, existing notions of a skills mismatch are a confused jumble of different ideas, ‘sketchy, vague, and diverse if not internally conflicting,’ to borrow a phrase.” (p. 10) Yet, the exclusive focus on “skills” leaves mismatch undefined in this study, and the mismatch model has a complicated methodological history based on its extension of the match model. Mismatch models—like match models—adopt several methods for measuring labor demand and supply. First, some use the Beveridge curve, which measures the ratio of unemployment and vacancies and assumes that the natural rate of unemployment is zero. (Schioppa, 1991; Jackman, Layard, and Savouri, 1991) Second, some use the equilibrium rate of unemployment which distinguishes between equilibrium unemployment and mismatch unemployment and assumes the equilibrium rate of unemployment is positive. (Abraham, 1991; Nickell, 1991; Otoo, 1999) Third, some evaluate the efficiency of the labor markets by how well supply wages and demand wages clear the market. Handel omits the history of the mismatch model, including the debate over the definition of mismatch. One of the first collections to define mismatch, Mismatch and Labour Mobility, edited by Fiorella Padoa Schioppa, isn’t listed in the bibliography. There is no mention of the Beveridge curve, nor of the equilibrium unemployment rate; nor does Handel refer to the matching function as a whole. The reason these methodologies are significant is that they formalize the relationship between the natural unemployment rate and the mismatch unemployment rate, and, as economists have shown, the problem of serial correlation has led to misestimations of the mismatch unemployment rate. (Brunello, 1991) Handel’s omission of the formal relationship of natural unemployment and mismatch unemployment leaves implicit a central assumption of this study. The second chapter, “Workers’ skills: education and test scores,” demonstrates with existing cross-sectional studies that there is a diversity of methodologies used to measure skills. There are test scores, intelligence tests, college entrance exams, the National Assessment of Educational Progress (NAEP), and adult reading and math scores. In addition to the diversity of methods used to measure skills, there is the additional difficulty of relating test performance to real-world occupational performance. And there is a strong impulse to use test scores to infer absolute levels of cognitive skills, rather than seeing the tests as measures of relative rank, and that the tests have reliability and validity problems. (p. 24) Yet Handel’s call to standardize the measurements of skills is superficial. Beyond accurate measurements of what may be causing unnatural levels of unemployment, it is necessary to differentiate between equilibrium unemployment and mismatch unemployment. As a result, Handel’s finding that reports of skills declines have been alarmist doesn’t support his conclusion that skills mismatch doesn’t exist. The third chapter, “Job skill requirements,” uses cross-sectional evidence to consider whether job skill requirements have outpaced the increase in labor skills. Handel considers trend analyses comprised of occupational studies and employer surveys and cross-sectional studies based on employer surveys and case studies. He finds that job skill requirements have not outpaced increases in educational abilities, and calls for improved data on trends in job skill requirements and their causes. Still this finding is again preliminary since it jumps to the question of what’s causing shocks to the labor market without first defining the equilibrium unemployment rate. In the fourth chapter, “Evidence for skills mismatch,” Handel repeats: “the concept of skills mismatch or skills shortage requires clarification.” (p. 59) Finally, Handel concludes that more data are needed to illuminate the skills mismatch debate. “Firm conclusions about the alleged skills mismatch are hampered by three problems: difficulties in ascertaining the job-relevant skills workers possess, an even more striking scarcity of information on the skills their jobs require, and problems relating the two kinds of evidence to one another.” (p. 77) To sum up, Worker Skills and Job Requirements: Is There a Mismatch? puts the evidentiary cart before the modeling horse. The study calls for greater standardization of the data and methodologies used to measure worker skills. But it is still unclear what methodological horse—Beveridge curve, equilibrium unemployment rate, supply/demand wages—is pulling this cart since the author of this study sidesteps the question of how equilibrium unemployment differs from mismatch unemployment. References Abraham, Katharine G., “Mismatch and labour mobility: some final remarks,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Autor, David H., Frank Levy, and Richard J. Murname, “The Skill Content of Recent Technological Change: An Empirical Exploration,” NBER, 2001. Blanchard, Oliver J. and Peter Diamond, “The Aggregate Matching Function.” NBER, 1989. Blanchard, Oliver J. and Peter Diamond, “The Beveridge Curve.” Brookings Papers on Economic Activity, 1989. Brunello, Giorgio, “Mismatch in Japan,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Franz, Wolfgang, “Match and mismatch on the German labour market,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Freeman, Richard, “Labour market tightness and the mismatch between demand and supply of less-educated young men in the United States in the 1980s,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Howell, David. “Technological Change and the Demand for Skills in the 1980s: Does Skills Mismatch Explain the Growth of Low Earnings?” NBER, 1993. Jackman, R., R. Layard, and S. Savouri, “Mismatch: a framework for thought,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Nickell, S.J., “Response,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Otoo, Maria Ward, “Temporary Employment and the Natural Rate of Unemployment.” Federal Reserve Board, 1999 (revised draft). Schioppa, Fiorella Padoa, “A cross-country comparison of sectoral mismatch in the 1980s,” Mismatch and Labour Mobility, ed. Fiorella Padoa Schioppa. Cambridge: Cambridge UP, 1991. Skinner, Curtis, “Measuring Skills Mismatch: New York City in the 1980s.” Urban Affairs Review, Vol. 36, No. 5., May 2001. About the Reviewer Cynthia Cameros is a graduate student at Johns Hopkins University and an Adjunct Professor, Economics, Sullivan County College. Copyright is retained by the first or sole author, who grants right of first publication to the Education Review.