The Evolving Supply and Demand of Skills

in the Labour Market

Ilaria MaselliCEPS

In this presentation• Labour demand and supply with

respect to education• Demand and its drivers• Supply• Vertical mismatch?• Future risks

Research question: are there too many or not enough skills?

Evolution of labour demand

Job polarisation in EU27, 2000-2010.

Low qualified jobs

Medium skilled jobs

ISCO classification

• Low skilled jobs = cleaners, labourers in construction, manufacturing and transport and food preparation assistants.

• Medium qualified jobs = plant and machine operators, electrical and electronic trades workers and craft and related trades workers.

• High profile jobs = managers, professionals, technicians

Evolution of labour demand

Italy vs Belgium (2000-2010)

Low qualified jobs

Medium skilled jobs

High skilled jobsHigh skilled jobs

Medium skilled jobs

Labour demand: 3 theories

• Skill-biased technological change

• Routinisation hypothesis

• Globalisation - offshoring

Labour demand

Job polarisation Other

BG, DE, EL, ES, FR, IT,

CY, HU, MT, NL, AT, PL,

RO, SL, FI, SE, UK

BE, CZ, DK, ET, IE, LV,

LT, LX, PT, SK

Labour supply: educational expansion

EU27, 2000-2010

Low skilled active pop 25-64

High skilled active pop 25-64

Medium skilled active pop 25-64

Labour supply: educational expansion

Demand and Supply wrt Skills

EU27, 2000-2010

Demand and Supply wrt Skills

EU27, 2010-2020 (CEDEFOP projections)

Demand and Supply wrt Skills

Vertical mismatch: risks

• Shortage of low skilled workers = ‘Korean scenario’

• Low skilled unemployment• Middle skilled ‘displacement’• Overqualification of high skilled• Equilibrium!

Vertical mismatch: risks

Enough graduate jobs for graduate workers?

Employment rate of high skilled high everywhere (around 80%)

Enough graduate jobs for graduate workers?

No evidence that employment rate of HS is lower in countries that expanded educ faster

Enough graduate jobs for graduate workers?

Yes BUT increase in heterogeneity:

For ex: returns from education more differentiated by subject

Vertical mismatch: risks

Low skilled jobs

• No Korean scenario: lack of people to take DDD jobs

• In some countries still more low skilled workers that low skilled jobs => risk of low skilled unemployment high despite educational expansion (EL, IT, PT, MT, DK)

Vertical mismatch: risks

Shrinking middle

• In Germany has shrunk from 62% to 54% of the population

• Same in Denmark: 31.5% to 28.6% of the population

Conclusions (1): EU vs countries

• EU27 as a whole in equilibrium • But cross-country differences ...high mobility would solve the

problem (and Eurozone crisis in part also!)

• Some countries will continue to deal with low skilled unemployment (Southern + DK)

Conclusions (2): shrinking middle• Others will face a new problem: excess

of middle skilled workers=> what will they do?

- Compete for higher skilled jobs (if possible)

- Compete for lower skilled ones- Innovation is @ work- “creative destruction” (Schumpeter)

Conclusions (3): shrinking middle again!

Shrinking middle = main looser:What are the Consequences? • higher income inequality• Over-education • Less job satisfaction? • Sociological and political science

problems to be explored. For example, concerning the financing of welfare?

Conclusions (4): what we may not catch

• We need further research to understand the skills interplay:

• Ex: the definition of a graduate job is not frozen in time: what we consider a graduate job today, like a journalist, did not require tertiary education twenty years ago. The same applies to non-graduate jobs: with the help of technology some former graduate jobs have been de-skilled (accounting for example) and the quality of other low skilled jobs has been increased. (Elias and Purcell 2004)

Thanks for the attention

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