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Chapter 2: Investing in human capital and responding to long-term societal challenges
reducing the share of involuntary forms Chart 22: Qualification mismatch is very high in some Member States
of at non-standard work contracts. Average incidence of vertical mismatch (2001–11) in EU-27
countries, % of employees (aged 25–64)
However, the spread of fixed-term con- 100
tracts can be seen to have encouraged 90 Matched qualification
firms to adopt a short-term approach to 80 Under-qualification
Over-qualification
the management of human resources, 70
which overestimates the short-term 60
benefits of a reduction in labour costs %
due to short-term flexible or temporary 50
contracts, and to discount the long-term 40
collective costs associated with reduced 30
human capital formation and the loss of 20
innovative capacity ( 103 ). 10
0
Atypical contracts often coincide with IE ES BE EL FR NL CY UK LT IT MT EE LV SE AT DE PT DK FI LU BG HU PL SI RO CZ SK
people having to accept jobs below
their level of education or not matching Source: European Commission (2012a).
their skills. Skill mismatch — a differ- Notes: Over-qualified (or under-qualified) workers are those whose highest level of qualification attained
ence between the skills and qualifica- is greater than (or lower than) the qualification requirement of their occupation. The modal qualification
tions that are available and those which in each occupational group at the two-digit level is used to measure qualification requirements. The
are needed in the labour market ( 104 ) appropriate EU-LFS weighting variable (COEFF) is used in the calculation of the modal qualification.
— especially if it is persistent, implies
real short- and long-term economic and where labour market information is low levels of public investment in edu-
social losses for individuals, employers imperfect and where education and cation and training and low expenditure
and society. Individuals working in jobs training systems need time to respond in labour market programmes, which
108
below their qualifications may earn less, to new knowledge and skill demands ( ). might reduce their quality and ability
be more prone to change jobs and in the However, in some EU Member States to respond to changing labour market
long-run will be more likely to lose skills almost half of the labour force is seen needs. There are few jobs available for
by not using them ( ) and become less to be mismatched, which is a huge highly educated graduates and many
105
satisfied with their jobs. waste of human potential (Chart 22), business executives in these countries
with vertical mismatch especially high consider that their educational systems
Those with insufficient skills are less in Mediterranean countries (e.g. Greece, are not meeting their business needs;
efficient and productive in their work. In Spain). enterprises provide less company train-
the long-run employers are faced with ing and pay less attention to human
higher recruitment and turnover costs, As the ageing society will require a strong resource management and recruitment.
as well as lower productivity and reduced acceleration of productivity growth due Highly mismatched countries tend to
competitiveness. For society as a whole, to the forthcoming workforce decline, have more rigid labour markets and
110
skill mismatch reduces matching effi- this waste of resources belongs to the higher labour market segmentation ( ).
ciency and increases unemployment ( ). most serious recent socioeconomic
106
In the long run it leads to under-invest- developments and will inevitably result Some skill mismatch is likely to continue
ment in training, low-skills-bad-jobs- in lower growth potential unless policy in the future given that, according to
low-wage equilibrium, and undermines takes decisive action. forecasts by Cedefop, the demand for the
long-run growth and social inclusion ( ). highly educated is expected to fall short
107
Some skill mismatch is inevitable in a Earlier Commission research has shown of supply, while the opposite is forecast
dynamic economy, where skill require- that countries with high levels of over- for the low qualified, in 2015 ( ). Raising
111
ments change as jobs are changing, qualification appear to share some awareness of the need to anticipate and
common characteristics ( 109 ). Already address potential mismatches in differ-
( ) ISFOL (2014). now (before the demographic shift) they ent sectors and occupations is an impor -
103
( ) Skill mismatch can be quantitative and tend to be less wealthy and have a lower tant investment into future growth, but
104
qualitative. The first one shows differences
between aggregate labour supply and share of services in GDP. They also have a reduction in skill mismatch requires
demand. Qualitative mismatch shows
differences between individuals’ skills and
job requirements at micro level, where
individuals can have higher qualifications 108
and skills than required (over-qualified ( ) Even if there is today a skill match, this can
or over-skilled) or lower (under-qualified change in the future, due to technological 110
or under-skilled). For a more detailed changes and changing job requirements, skill ( ) See European Commission (2012a).
presentation of various forms of skill depreciation and obsolescence if there is no ( ) Cedefop, Skills forecasts, Online data
111
mismatch, see European Commission further training (European Commission, 2012a). and results (April 2014) and Flisi et al.
(2012a) and Flisi et al. (2014). ( ) Those characteristics are based on observing (2014). Eurostat has recently published a
109
( ) See evidence by results on Adults skills vertical mismatch for 2001–09. The high new population projection Europop 2013
105
survey (OECD 2013a) and Pellizzari and over-qualification cluster includes Greece, that significantly changes current labour
Fichen (2013). Italy, Portugal, Cyprus, Lithuania, Ireland and supply estimates, especially at the national
Spain, while the medium over-qualification
level. Cedefop is currently working on
106
( ) European Commission (2013d). cluster includes Austria, Belgium, Denmark, the evaluation of possible impacts of the
( ) For more details on the economic and Estonia, France, Luxembourg, Latvia, the new population projections on the skills
107
welfare cost of skill mismatch, see European Netherlands, Sweden and the UK. See forecasting results and will produce a new
Commission (2012a). European Commission (2012a). forecast in early 2015.
123
reducing the share of involuntary forms Chart 22: Qualification mismatch is very high in some Member States
of at non-standard work contracts. Average incidence of vertical mismatch (2001–11) in EU-27
countries, % of employees (aged 25–64)
However, the spread of fixed-term con- 100
tracts can be seen to have encouraged 90 Matched qualification
firms to adopt a short-term approach to 80 Under-qualification
Over-qualification
the management of human resources, 70
which overestimates the short-term 60
benefits of a reduction in labour costs %
due to short-term flexible or temporary 50
contracts, and to discount the long-term 40
collective costs associated with reduced 30
human capital formation and the loss of 20
innovative capacity ( 103 ). 10
0
Atypical contracts often coincide with IE ES BE EL FR NL CY UK LT IT MT EE LV SE AT DE PT DK FI LU BG HU PL SI RO CZ SK
people having to accept jobs below
their level of education or not matching Source: European Commission (2012a).
their skills. Skill mismatch — a differ- Notes: Over-qualified (or under-qualified) workers are those whose highest level of qualification attained
ence between the skills and qualifica- is greater than (or lower than) the qualification requirement of their occupation. The modal qualification
tions that are available and those which in each occupational group at the two-digit level is used to measure qualification requirements. The
are needed in the labour market ( 104 ) appropriate EU-LFS weighting variable (COEFF) is used in the calculation of the modal qualification.
— especially if it is persistent, implies
real short- and long-term economic and where labour market information is low levels of public investment in edu-
social losses for individuals, employers imperfect and where education and cation and training and low expenditure
and society. Individuals working in jobs training systems need time to respond in labour market programmes, which
108
below their qualifications may earn less, to new knowledge and skill demands ( ). might reduce their quality and ability
be more prone to change jobs and in the However, in some EU Member States to respond to changing labour market
long-run will be more likely to lose skills almost half of the labour force is seen needs. There are few jobs available for
by not using them ( ) and become less to be mismatched, which is a huge highly educated graduates and many
105
satisfied with their jobs. waste of human potential (Chart 22), business executives in these countries
with vertical mismatch especially high consider that their educational systems
Those with insufficient skills are less in Mediterranean countries (e.g. Greece, are not meeting their business needs;
efficient and productive in their work. In Spain). enterprises provide less company train-
the long-run employers are faced with ing and pay less attention to human
higher recruitment and turnover costs, As the ageing society will require a strong resource management and recruitment.
as well as lower productivity and reduced acceleration of productivity growth due Highly mismatched countries tend to
competitiveness. For society as a whole, to the forthcoming workforce decline, have more rigid labour markets and
110
skill mismatch reduces matching effi- this waste of resources belongs to the higher labour market segmentation ( ).
ciency and increases unemployment ( ). most serious recent socioeconomic
106
In the long run it leads to under-invest- developments and will inevitably result Some skill mismatch is likely to continue
ment in training, low-skills-bad-jobs- in lower growth potential unless policy in the future given that, according to
low-wage equilibrium, and undermines takes decisive action. forecasts by Cedefop, the demand for the
long-run growth and social inclusion ( ). highly educated is expected to fall short
107
Some skill mismatch is inevitable in a Earlier Commission research has shown of supply, while the opposite is forecast
dynamic economy, where skill require- that countries with high levels of over- for the low qualified, in 2015 ( ). Raising
111
ments change as jobs are changing, qualification appear to share some awareness of the need to anticipate and
common characteristics ( 109 ). Already address potential mismatches in differ-
( ) ISFOL (2014). now (before the demographic shift) they ent sectors and occupations is an impor -
103
( ) Skill mismatch can be quantitative and tend to be less wealthy and have a lower tant investment into future growth, but
104
qualitative. The first one shows differences
between aggregate labour supply and share of services in GDP. They also have a reduction in skill mismatch requires
demand. Qualitative mismatch shows
differences between individuals’ skills and
job requirements at micro level, where
individuals can have higher qualifications 108
and skills than required (over-qualified ( ) Even if there is today a skill match, this can
or over-skilled) or lower (under-qualified change in the future, due to technological 110
or under-skilled). For a more detailed changes and changing job requirements, skill ( ) See European Commission (2012a).
presentation of various forms of skill depreciation and obsolescence if there is no ( ) Cedefop, Skills forecasts, Online data
111
mismatch, see European Commission further training (European Commission, 2012a). and results (April 2014) and Flisi et al.
(2012a) and Flisi et al. (2014). ( ) Those characteristics are based on observing (2014). Eurostat has recently published a
109
( ) See evidence by results on Adults skills vertical mismatch for 2001–09. The high new population projection Europop 2013
105
survey (OECD 2013a) and Pellizzari and over-qualification cluster includes Greece, that significantly changes current labour
Fichen (2013). Italy, Portugal, Cyprus, Lithuania, Ireland and supply estimates, especially at the national
Spain, while the medium over-qualification
level. Cedefop is currently working on
106
( ) European Commission (2013d). cluster includes Austria, Belgium, Denmark, the evaluation of possible impacts of the
( ) For more details on the economic and Estonia, France, Luxembourg, Latvia, the new population projections on the skills
107
welfare cost of skill mismatch, see European Netherlands, Sweden and the UK. See forecasting results and will produce a new
Commission (2012a). European Commission (2012a). forecast in early 2015.
123
