The dark side of skill rise? Employment decline among youth and immigrants
In Sweden and many other countries, young people and immigrants are facing increasing difficulties in finding employment. Our aim in the project proposed here is to discover why. These are burning social issues - the mental well-being of youth has deteriorated in tandem with their dwindling labor market prospects; international migration is approaching record levels in response to economic and political turmoil across the globe. It is urgent to improve the employment chances of youth and immigrants which requires an understanding of why their prospects have worsened in recent decades. Our main hypothesis is that the upward shift in the skill structure of labor markets - the growing shares of workers with high education and of jobs with high skill requirements - has made crossing the border into employment more demanding and might have affected youth and recent immigrants more than others. This hypothesis has not been systematically evaluated in previous research. In the proposed project we examine how the employment rates of the young (age 20-29) and the foreign-born are linked, across countries and over time, to the skill structure of labor markets. We use labor force survey data from around 20 European countries over a period of 20 years, from the 1990s to the present. Our aim is to build a solid evidence base regarding associations between skill structure and employment inequality, a base that hitherto has been remarkably weak given the heavy weight of the issues.
Final report
The dark side of skill rise?
Employment decline among youth and immigrants
RJ P16-0843:1; Period of support 2017-2019/20
Michael Tåhlin (Swedish Institute for Social Research (SOFI), Stockholm University), project leader
Erik Bihagen (SOFI, SU)
Ryszard Szulkin (Department of Sociology, SU)
Johan Westerman (SOFI, SU); no salary from the project
The project’s aim and points of departure
The project’s main question is how the upgrading of the labour market’s skill structure – i.e., the emergence of what is commonly referred to as the knowledge society – affects the employment chances of marginal groups, especially youth and immigrants.
The background to the project is declining employment rates among young and foreign-born people, in Sweden and many other countries, in recent decades. At the same time, there a strong upgrading of the skill structure has taken place, i.e., an increase in the level of education of individuals and the educational requirements of jobs.
Is there a connection between these two trends, i.e., can the rising skill requirements be a major reason for young people's and immigrants’ increased difficulties in the labor market?
Theoretical explanatory model
Young people and (newly arrived) immigrants are newcomers to the labor market and thus dependent on entry-level jobs. Such jobs tend to have relatively low requirements, especially in terms of experience. Requirements for experience tend to be higher in more skilled jobs. Thus, upgrading of the skill structure of the labour market (the emergence of the knowledge society) can lead to reduced employment chances for youth and foreign-born people. The labor market has two sides, supply (individuals) and demand (jobs). The skill structure of the labor market consists of individuals' human capital (productive resources) and the human capital requirements of jobs (tasks). Upgrading of the skill structure takes place on both the supply and demand side, i.e., an increase in both the level of education of individuals and the educational requirements of jobs.
Skill upgrading has two main elements:
- a matched skill upgrading, meaning that the individuals' education and the jobs' educational requirements are growing at an equal pace;
- an increase in over-education, meaning that the education of individuals is growing faster than are the educational requirements of jobs;
- an increase in under-education, i.e., that the educational requirements of jobs are growing faster than the education of individuals, can also mean upgrading, but such a development is significantly less common than matched skill upgrading and over-education.
The link between upgrading of the skill structure and reduced employment chances for youth and immigrants mainly consists in an increased importance of experience. This change puts newcomers in the labour market at a disadvantage. With increased educational requirements comes rising demand for experience. This association is reflected both in higher wage premiums for experience in skilled jobs and in employers' requirements for experience when recruiting for jobs at different skill levels.
With growing over-education, i.e., a faster increase in individuals' qualifications than in the qualification requirements of jobs, relatively inexperienced people are being outcompeted from the world of work due to low-skill jobs being occupied by qualified people who have not been able to find a skilled job.
Brief description of the project’s completion
Planned and performed sub-studies of the project
Sub-study 1: The importance of skill upgrading for youth employment.
Sub-study 2: The importance of skill upgrading for immigrant employment.
Sub-study 3: Internal variation (by gender, age, country of birth, education) among youth and immigrants in the importance of skill upgrading for employment. This sub-study has not been conducted separately, but has been partially integrated into sub-studies 1 and 2.
Sub-study 4: Variations over the business cycle in the importance of structural upgrading for the employment of youth and immigrants.
All the above-mentioned sub-studies use data from the European Labour Force Surveys (EU-LFS), 1998-2016.
The three most important findings of the project
1) Both matched upgrading of the labour market qualification structure (i.e. a parallel increase in individuals' education and job training requirements) and increased over-education (i.e., a faster increase in individuals' education than in the jobs' educational requirements) have a negative effect on the employment chances of young people and foreign-born.
2) Economic cycles amplify the negative effect of the upgrading of the qualification structure on the employment chances of marginal groups: the decline in youth employment in recessions is greater than the rise in their employment in recovery, leading to a downward structural spiral over successive completed economic cycles.
3) The transformation of the job structure is not only vertical, but also horizontal. The horizontal change is due to the long-standing shift from production to service. The widespread notion of job polarization, i.e. an erosion of the center along the vertical dimension of the job structure, actually consists of service expansion, i.e. a transformation along the horizontal dimension of the structure. The myth of polarization has arisen because vertical and horizontal structural change have been confused with each other.
Brief discussion of the project’s conclusions
What are the policy implications of our research findings? We have found that both matched skill upgrading and over-education tend to impair marginal groups' employment chances. But at least matched upgrading is, of course, beneficial in many ways. Reduced employment for youth and immigrants can be seen as a negative side effect of positive general developments. One possible way forward would be to subsidize low-skilled entry-level jobs in sectors where demand for labor is high but wage floors are also (prohibitively) high. While this would reduce the average productivity of the labour force, an increase in the overall employment rate would increase the average productivity of the population.
When it comes to mismatch between the education of individuals and the educational requirements of jobs, we seem to confront a problem of the “tragedy of the commons” type: at the individual level, it is typically rational to pursue further education in order to become more competitive in the labor market. And this is also the usual policy recommendation. But the more individuals increase their education, the fiercer the competition that each individual person faces. According to our findings, aggregate over-education can hurt the employment prospects of marginal groups. The political task, therefore, is hardly a general expansion of education, but to more carefully calibrate the expansion in terms of both scope and direction.
New research questions emerging from the project: three new sub-studies
The structure of working life is not only vertical, but also horizontal. The same applies to structural change, a transformation that has far-reaching consequences for the employment chances of marginal groups, which are the main issue of the project. But the consequences can also be political. In the transition to a knowledge and post-industrial society, populist movements have grown in importance. Two sub-studies in the project, not planned from the outset, are linked to this structural shift. One of the studies shows that the change in the structure of working life, which has often been interpreted as a polarization of the job structure with regard to skill requirements, is actually a transition from male-dominated production work to female-dominated services. This change can be perceived as threatening by many traditional working class males. Another possible perceived threat of groups losing status is a combination of increased immigration and economic stagnation in the form of, for example, rising unemployment. One of the project's new (not originally planned) sub-studies suggests that this combination fuels anti-immigration attitudes.
In a third new sub-study, individuals' income development is analyzed. This is a longer-term outcome than employment in aggregate repeated cross-sections, as in the main sub-studies of the project. The income analyses are based on Swedish longitudinal register data, with regional comparisons as a parallel to the cross-national comparisons that otherwise are in focus of the project.
Dissemination of the project’s research findings
The members of the project have participated in a number of different events, both within and outside Sweden, where they have disseminated and discussed their findings. Examples include plenary lectures at the annual conference of the Forum for Working Life Research (FALF), Gävle (2018), the Network for Research on Social Policy and Welfare Annual Conference, Uppsala (2018), participation in a textbook on working life (ed. Åke Sandberg, Studentlitteratur 2019), op-ed article on DN Debatt (2019), report at Arena Idé (2019), presentation in Almedalen (2019), lecture at symposium in Lund (2019), lecture at conference on polarization in Gothenburg (2019), participation in debate in Stockholm on polarization organized by the Labor Movement's research network (2019), Technequality (EU Framework Program) online workshop (2020), presentation at seminar at Ratio, Stockholm (2020), and presentation at the Technequality (EU Framework Program) online final conference (2021).
Employment decline among youth and immigrants
RJ P16-0843:1; Period of support 2017-2019/20
Michael Tåhlin (Swedish Institute for Social Research (SOFI), Stockholm University), project leader
Erik Bihagen (SOFI, SU)
Ryszard Szulkin (Department of Sociology, SU)
Johan Westerman (SOFI, SU); no salary from the project
The project’s aim and points of departure
The project’s main question is how the upgrading of the labour market’s skill structure – i.e., the emergence of what is commonly referred to as the knowledge society – affects the employment chances of marginal groups, especially youth and immigrants.
The background to the project is declining employment rates among young and foreign-born people, in Sweden and many other countries, in recent decades. At the same time, there a strong upgrading of the skill structure has taken place, i.e., an increase in the level of education of individuals and the educational requirements of jobs.
Is there a connection between these two trends, i.e., can the rising skill requirements be a major reason for young people's and immigrants’ increased difficulties in the labor market?
Theoretical explanatory model
Young people and (newly arrived) immigrants are newcomers to the labor market and thus dependent on entry-level jobs. Such jobs tend to have relatively low requirements, especially in terms of experience. Requirements for experience tend to be higher in more skilled jobs. Thus, upgrading of the skill structure of the labour market (the emergence of the knowledge society) can lead to reduced employment chances for youth and foreign-born people. The labor market has two sides, supply (individuals) and demand (jobs). The skill structure of the labor market consists of individuals' human capital (productive resources) and the human capital requirements of jobs (tasks). Upgrading of the skill structure takes place on both the supply and demand side, i.e., an increase in both the level of education of individuals and the educational requirements of jobs.
Skill upgrading has two main elements:
- a matched skill upgrading, meaning that the individuals' education and the jobs' educational requirements are growing at an equal pace;
- an increase in over-education, meaning that the education of individuals is growing faster than are the educational requirements of jobs;
- an increase in under-education, i.e., that the educational requirements of jobs are growing faster than the education of individuals, can also mean upgrading, but such a development is significantly less common than matched skill upgrading and over-education.
The link between upgrading of the skill structure and reduced employment chances for youth and immigrants mainly consists in an increased importance of experience. This change puts newcomers in the labour market at a disadvantage. With increased educational requirements comes rising demand for experience. This association is reflected both in higher wage premiums for experience in skilled jobs and in employers' requirements for experience when recruiting for jobs at different skill levels.
With growing over-education, i.e., a faster increase in individuals' qualifications than in the qualification requirements of jobs, relatively inexperienced people are being outcompeted from the world of work due to low-skill jobs being occupied by qualified people who have not been able to find a skilled job.
Brief description of the project’s completion
Planned and performed sub-studies of the project
Sub-study 1: The importance of skill upgrading for youth employment.
Sub-study 2: The importance of skill upgrading for immigrant employment.
Sub-study 3: Internal variation (by gender, age, country of birth, education) among youth and immigrants in the importance of skill upgrading for employment. This sub-study has not been conducted separately, but has been partially integrated into sub-studies 1 and 2.
Sub-study 4: Variations over the business cycle in the importance of structural upgrading for the employment of youth and immigrants.
All the above-mentioned sub-studies use data from the European Labour Force Surveys (EU-LFS), 1998-2016.
The three most important findings of the project
1) Both matched upgrading of the labour market qualification structure (i.e. a parallel increase in individuals' education and job training requirements) and increased over-education (i.e., a faster increase in individuals' education than in the jobs' educational requirements) have a negative effect on the employment chances of young people and foreign-born.
2) Economic cycles amplify the negative effect of the upgrading of the qualification structure on the employment chances of marginal groups: the decline in youth employment in recessions is greater than the rise in their employment in recovery, leading to a downward structural spiral over successive completed economic cycles.
3) The transformation of the job structure is not only vertical, but also horizontal. The horizontal change is due to the long-standing shift from production to service. The widespread notion of job polarization, i.e. an erosion of the center along the vertical dimension of the job structure, actually consists of service expansion, i.e. a transformation along the horizontal dimension of the structure. The myth of polarization has arisen because vertical and horizontal structural change have been confused with each other.
Brief discussion of the project’s conclusions
What are the policy implications of our research findings? We have found that both matched skill upgrading and over-education tend to impair marginal groups' employment chances. But at least matched upgrading is, of course, beneficial in many ways. Reduced employment for youth and immigrants can be seen as a negative side effect of positive general developments. One possible way forward would be to subsidize low-skilled entry-level jobs in sectors where demand for labor is high but wage floors are also (prohibitively) high. While this would reduce the average productivity of the labour force, an increase in the overall employment rate would increase the average productivity of the population.
When it comes to mismatch between the education of individuals and the educational requirements of jobs, we seem to confront a problem of the “tragedy of the commons” type: at the individual level, it is typically rational to pursue further education in order to become more competitive in the labor market. And this is also the usual policy recommendation. But the more individuals increase their education, the fiercer the competition that each individual person faces. According to our findings, aggregate over-education can hurt the employment prospects of marginal groups. The political task, therefore, is hardly a general expansion of education, but to more carefully calibrate the expansion in terms of both scope and direction.
New research questions emerging from the project: three new sub-studies
The structure of working life is not only vertical, but also horizontal. The same applies to structural change, a transformation that has far-reaching consequences for the employment chances of marginal groups, which are the main issue of the project. But the consequences can also be political. In the transition to a knowledge and post-industrial society, populist movements have grown in importance. Two sub-studies in the project, not planned from the outset, are linked to this structural shift. One of the studies shows that the change in the structure of working life, which has often been interpreted as a polarization of the job structure with regard to skill requirements, is actually a transition from male-dominated production work to female-dominated services. This change can be perceived as threatening by many traditional working class males. Another possible perceived threat of groups losing status is a combination of increased immigration and economic stagnation in the form of, for example, rising unemployment. One of the project's new (not originally planned) sub-studies suggests that this combination fuels anti-immigration attitudes.
In a third new sub-study, individuals' income development is analyzed. This is a longer-term outcome than employment in aggregate repeated cross-sections, as in the main sub-studies of the project. The income analyses are based on Swedish longitudinal register data, with regional comparisons as a parallel to the cross-national comparisons that otherwise are in focus of the project.
Dissemination of the project’s research findings
The members of the project have participated in a number of different events, both within and outside Sweden, where they have disseminated and discussed their findings. Examples include plenary lectures at the annual conference of the Forum for Working Life Research (FALF), Gävle (2018), the Network for Research on Social Policy and Welfare Annual Conference, Uppsala (2018), participation in a textbook on working life (ed. Åke Sandberg, Studentlitteratur 2019), op-ed article on DN Debatt (2019), report at Arena Idé (2019), presentation in Almedalen (2019), lecture at symposium in Lund (2019), lecture at conference on polarization in Gothenburg (2019), participation in debate in Stockholm on polarization organized by the Labor Movement's research network (2019), Technequality (EU Framework Program) online workshop (2020), presentation at seminar at Ratio, Stockholm (2020), and presentation at the Technequality (EU Framework Program) online final conference (2021).