One might expect that as an expansion continues and as labor market conditions become tight, employers would reach further down the skills continuum. As labor markets tighten, unemployment rates would fall first for workers of higher skill levels and then for workers with less skill and education. Employers would then seek employees from among those who were out of the labor force, trying to entice them with appealing labor market opportunities. We would thus see rising employment rates first for the higher skilled and then for the lower skilled. Eventually, if labor markets became sufficiently tight, the labor force participation rates for all skill levels should converge toward some maximum feasible rate.
Analysts believe that educational attainment is a good proxy for skill level.
We do not think so. Finally, and more importantly, closer analysis of employment and population data casts doubt on the conclusion that employment opportunities increased significantly for the less skilled during the Clinton expansion. Although it is true that unemployment rates fell and employment rates rose, the apparent improvement is the result of a decline in the population of those who have not attended college. As we show, almost all the job gains went to the population with at least some college education. The U.S. population grew by 11.4 million between 1992 and 1998, employment rose by 11.6 million, unemployment fell by 2.7 million, and the number of individuals out of the labor force rose by 2.5 million.