Labor Market Concentration and the Demand for Skills

How is labor market concentration related to the skill content of jobs in a local area? In this paper, we bring novel, comprehensive data on job postings to this question, and show that (i) labor market concentration raises the skill requirements of jobs, even within narrowly-defined occupations; (ii) the largest increase in skill demand involves cognitive, social, and organizational skills; and (iii) the increase in skill requirements is larger for low-skilled occupations than for high-skilled occupations. These facts are not driven by markets with one or two employers, and are also present when we rely only on within-firm variation in labor market concentration. The increase in demand for skills associated with a 1% increase in local labor market concentration is substantial, and at least half as large as the effect of an increase of 1% in the local share of the college- educated population. We conclude that there is substantial evidence of upskilling in concentrated labor markets, and that our empirical findings are consistent with employers’ market power.