The Change in Labour Skills in Australia over the Business Cycle

This paper presents an analysis of skill change for each of several skill dimensions for Australia for the period 1991 to 2006. This period is of particular interest since it covers three phases of the business cycle - recession, full employment and excess demand. The pronounced shedding of low skill workers and increased demand for skilled workers observed in many countries over the last two decades has been attributed to a number of different causes. In this paper the attributes of different occupations are used to obtain measures of distinct skill dimensions - motor, cognitive and interactive, plus education. The results indicate that there were very significant changes in skills mix during the three phases of the business cycle. The mean level declined for motor skills but rose for the other dimensions, particularly interactive. The results have important implications for policy, particularly in relation to employment, unemployment and training.