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High skills have high payoff

In real estate, the age-old mantra is "location, location, location."?There's the same type of thing in today's job market, only it's "skills, skills, skills."

A new study from the Federal Reserve Bank of New York makes that point clearer than ever. It found that there's a growing gap in upstate New York between the jobs that require the highest skills – and pay the best – and the low-skill jobs that pay the least. And it's the workers in between – especially those whose skills are on the lower end of the scale – who are getting squeezed hard because many of those jobs can be replaced by technology or handled by lower-paid workers overseas.

"Technology has displaced many of what we think of as middle-skill jobs," said Richard Deitz, a Federal Reserve economist in Buffalo.

"There's also been a polarizing effect that we've seen in wages. Wage growth has been concentrated in the high-skill jobs," Deitz said. "Middle-skill workers have seen little change in their wages."

With high school graduation season upon us, the study sends an important message to the students who will be joining the workforce full time: Now, more than ever, it pays to hone your skills – and to keep improving them.

"The pathway to a traditional middle-class job is changing," Deitz said. "Skills are particularly important. Workers increasingly need a higher degree of skills than ever before."

For some graduates, developing those skills will take them to college. While the high costs – and the accompanying hefty student-loan debt that comes with it – put many recent college graduates in a bind because they can't find jobs in today's tight economy that pay enough to cover their loan payments, Deitz said college is still a worthwhile investment. One reason why wages are rising faster for high-skill jobs is that the demand for workers with college educations is outstripping the supply in many fields, from mathematics and technology to engineering and architecture.

Even in occupations that aren't directly on the college path, developing your skills is essential. Security guards, for instance, earn less than half as much as a typical police officer, according to state Labor Department data. And detectives earn more than street cops.

"The higher skill requirement is important for everyone," Deitz said. "Access to a college education is increasingly important," as are regional programs that coordinate the skills that are taught in local high schools, colleges and job-training centers with the skills that local employers need in their workers.

The Fed study found that ?the gap between the best-paid and lowest-paid work is growing., Deitz said that's partly because some of the workers in today's low-skill jobs are ?displaced factory workers who can command slightly higher wages because of the skills and experience they gathered in their former jobs.

Still, the trends over the past 30 years are striking. Across upstate, the number of high-skill jobs grew by 47 percent from 1980 to 2010, while low-skill jobs jumped by 38 percent. But the growth was much weaker among jobs requiring what the Fed economists characterized as midlevel skills. Job growth among occupations skills in the upper half of that middle tier grew by 24 percent, while those in the lower half of the middle tier actually fell by 5 percent – a group that includes office staff, sales reps, machine operators and transit workers.

Those lower-middle skill jobs are particularly vulnerable during a recession because they often involve routine tasks that can be easily replaced by technology or are prime candidates to be outsourced to low-cost labor markets. It's when times are tough that companies often are most interested in investing in labor-saving technology, said William C. Dudley, the New York Fed's president.

Back in 1980, a little more than two of every three jobs across upstate New York required mid-level skills – occupations such as teachers, office staff, construction workers and machine operators. Now, it's less than three of every five jobs. Deitz said that's because of the decline in manufacturing and impact of technology on jobs involving routine tasks.

At the same time, 24 percent of upstate's jobs now require high skills, up from 19 percent in 1980. Low-skill positions – from restaurant workers to health care aides and janitors – also have expanded, accounting for 16 percent of upstate jobs, up from 13 percent three decades ago.

The best defense for workers in tough times is to have skills that their employers need. That's good for the region, too.

As Fed economist Jaison Abel says, there's no better way to predict a region's economic success than to look at the overall skills of its workforce.