Forecasting skills supply and demand – Cedefop

modelling approach

Rob Wilson

Institute for Employment Research

University of Warwick

Session 1: Forecasting skills supply and demand in Europe - Cedefop modelling approach -Expert seminar on Methodology and new ideas: Thessaloniki, 3rd October 2013

Overview

Purpose of the projections

Overall approach

Role of the E3ME multi-sectoral macroeconomic model

Modelling the supply of and demand for skills

Key issues to be addressed

Purpose of the projections

To provide a comprehensive and consistent overview of anticipated skill demand and supplies across Europe using common data and models taking account of key drivers such as climate change,

globalisation, technological change and demographic developments

To inform strategic thinking and policy-design to respond successfully to challenges and opportunities

Modelling framework

Module 1: Multi-sectoral macroeconomic model (E3ME)

Employment (labour demand)

Labour market participation rates

Benefit rates

Economic activity

Active labour force by age and gender

Working age population by age and gender (exogenous)

Unemployment

Wage rates

Job openings

by Occupation

(ISCO 2 digit)

Job openings by Qualification

(ISCED category)

Module 2: Employment levels and Expansion

Demand by occupation (EDMOD)

Module 3: Employment levels

and Expansion Demand by qualification (QUALMOD)

Module 4: Replacement demand by occupation / qualification (RDMOD)

Module 6: Stocks & Flow numbers by ISCED category

(STOCKFLOWMOD)

Numbers in the population by ISCED

category

Module 5: Stocks of people by

qualifications, 3 ISCED levels & by economic status (STOCKMOD)

Module 7: Imbalances (Supply-Demand), 3 ISCED

levels (BALMOD)

Numbers in the labour force by ISCED category

Supply of skills Demand for skills

Module 8: Occupational Skills Profiles (OSPs)

Role of the E3ME multi-sectoral macroeconomic model

Model the links between the labour market and the wider economy

Provide a consistent modelling framework for projecting skills demand and supply together allows analysis of imbalances (unemployment)

Take key drivers into account e.g. the impacts of the financial crisis and demographic change

Include analyses of key uncertainties develop alternative scenarios to see how these will impact on skills

in the future

Key strengths of E3ME

Integration of the economy, energy systems and environment, and the labour market

Detailed sectoral disaggregation and linkages (69 NACE sectors and full input-output table)

Geographical coverage and linkages (EU28+3) linked through international trade equations

Econometric specification with estimated equations for: labour demand; supply; wages; and working hours

Test

The labour market: endogenous links within E3ME

Economic activity

Participation rates

Labour supply Unemployment Wage rates

Employment

Hours worked Population

Modelling economy inter-linkages

economic activity

exports

total demand

employment

public consumption

household expenditure

incomes

imports

output

other countries' exports

Region

investment &

production inputs

includes innovation effects

Rest of the World

includes price/wage effects

Rest of the EU

economic activity

Modelling the supply of and demand for skills Use of the LFS to measure skills (occupations and

qualifications)

Separate supply, demand and imbalances modules

Demand – occupational and qualification patterns within industries

Supply – stock flow models of qualification attainments

Imbalances and mismatches – reconciling demand with available supply

Key issues to be addressed – the move to ISCO08 for classifying Occupations Information only available for one year (2011)

severely limits what can be done

Combination of this with previous time series and projection methods using heroic assumptions

New data in 2014 and beyond will gradual enable refinement of the approach

Summary

E3ME is to model the links between the labour market and the wider economy

LFS data to model skills as measured by occupation and qualification

Consistent modular framework for projecting skills demand and supply together

Dealing with the shift to ISCO08 in a pragmatic and transparent fashion

Professor Rob Wilson, Warwick institute for Employment Research

Email: r.a.wilson@warwick.ac.uk

www.warwick.ac.uk/ier

Further information