The Evolving Supply and Demand of Skills in the Labour Market

1. The Evolving Supply and Demand of Skills in the Labour Market Ilaria Maselli CEPS

2. 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?

3. Evolution of labour demand Low qualified jobs Medium skilled jobs Job polarisation in EU27, 2000-2010.

4. 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

5. Evolution of labour demand High skilled jobs High skilled jobs Low qualified jobs Medium skilled jobs Medium skilled jobs Italy vs Belgium (2000-2010)

6. Labour demand: 3 theories Skill-biased technological change Routinisation hypothesis Globalisation - offshoring

7. Labour demand

8. Labour supply: educational expansion High skilled active pop 25-64 Medium skilled active pop 25-64 Low skilled active pop 25-64 EU27, 2000-2010

9. Labour supply: educational expansion

10. Demand and Supply wrt Skills EU27, 2000-2010

11. Demand and Supply wrt Skills EU27, 2010-2020 (CEDEFOP projections)

12. Demand and Supply wrt Skills

13. Vertical mismatch: risks Shortage of low skilled workers = ‘Korean scenario’ Low skilled unemployment Middle skilled ‘displacement’ Overqualification of high skilled Equilibrium!

14. Vertical mismatch: risks

15. Enough graduate jobs for graduate workers? Employment rate of high skilled high everywhere (around 80%)

16. Enough graduate jobs for graduate workers? No evidence that employment rate of HS is lower in countries that expanded educ faster

17. Enough graduate jobs for graduate workers? Yes BUT increase in heterogeneity: For ex: returns from education more differentiated by subject

18. Vertical mismatch: risks

19. 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)

20. Vertical mismatch: risks

21. Shrinking middle In Germany has shrunk from 62% to 54% of the population Same in Denmark: 31.5% to 28.6% of the population

22. 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)

23. 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)

24. 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?

25. 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)

26. Thanks for the attention

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