SKILLS USE AND MISMATCH AT
WORK : WHAT DOES PIAAC TELL US?
Glenda Quintini
Senior Economist, Skills and Employability divisionDirectorate for Employment, Labour and Social Affairs
THE IMPERFECT MATCHILO International Conference on Jobs and Skills MismatchGeneva 11-12 May 2017
Note regarding CyprusNote by TurkeyThe information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European UnionThe Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Housekeeping
L’enquête d’Évaluation des Compétences des
Adultes
Respondents with very low literacy skills were directed to a test of basic “reading components
33 countries – 215 thousand adults…Representing 815 millions 16-65 year-olds24 countries in 2012 + 9 countries in 2015
Internationally agreed assessment in
literacy, numeracy and problem solving in
technology-rich environments…
The survey also collects a range of generic skills such as collaborating with others and organising one’s time, required of individuals in their work.
What is mismatch?
“English Lit – How about you?”
• Mismatch points to an imbalance between the
skills a worker has or the training he/she has
received and the skills or training required to
perform his/her job
– Qualifications mismatch: over/under
– Skills mismatch: over/under
– Field-of-study mismatch
– How pervasive is mismatch?
– Why does it matter?
– What causes it?• Proficiency levels
• A field’s saturation and skills transferability
• The use of skills in the workplace
Three questions
Drawing from several studies
• Quintini, G. (2011), "Right for the Job: Over-Qualified or Under-Skilled?", OECD Social, Employment and Migration Working Papers, No. 120, OECD Publishing, Paris.
• OECD (2016), “Skills Matter: Further results from the Survey of Adult Skills”, OECD Publishing, Paris.
• Montt, G. (2015), "The causes and consequences of field-of-study mismatch: An analysis using PIAAC", OECD Social, Employment and Migration Working Papers, No. 167, OECD Publishing, Paris.
• Adalet McGowan, M and D. Andrews (2015), “Labour market mismatch and labour productivity: Evidence from PIAAC data”, OECD Economics Department Working Paper, No. 1209
• OECD (2016), OECD Employment Outlook, “Skills use at work: why does it matter and what causes it?”, Chapter 2 , OECD Publishing, Paris
How pervasive is mismatch?
The worker has higher
(lower) qualifications
than those needed to
get the job
• On average:
– 21% over-qualified
– 13% under-qualified
Over 1/3 workers are mismatched by
qualifications
Source: Survey of Adult Skills (PIAAC) (2012)
Incidence of Qualifications MismatchPIAAC countries, 2012
0.00 10.00 20.00 30.00 40.00 50.00
FranceIreland
England/N. Ireland (UK)AustraliaCanadaSweden
JapanEstonia
ItalyAustriaNorway
AverageGermany
NetherlandsUnited States
KoreaSpain
FinlandFlanders (Belgium)
Czech RepublicDenmark
PolandSlovak Republic
Overqualification
Underqualification
The worker has a
higher (lower) skill
level than those of
workers who are well-
matched
• On average:
– 10% over-skilled
– 4% under-skilled
Around 1/7 workers are mismatched by
literacy levels
0 5 10 15 20 25
IrelandSpain
AustriaCzech Republic
ItalyCyprus¹ ²
Slovak RepublicGermany
England/N. Ireland (UK)AverageNorway
JapanUnited States
KoreaDenmarkAustraliaEstonia
Flanders (Belgium)SwedenFrance
CanadaFinlandPoland
Netherlands Over-skilled
Under-skilled
Source: Survey of Adult Skills (PIAAC) (2012)
Incidence of Skills MismatchLiteracy, PIAAC countries, 2012
The worker’s highest
qualification is in a
field that is not related
to the job
• On average:
– 39% mismatch
– (40% also
mismatched by
qualification)
Around 4/10 workers are mismatched by
field of study
0 20 40 60
KoreaEngland/N. Ireland (UK)
ItalyAustralia
JapanUnited States
SpainFrance
Russian FederationIrelandPoland
Flanders (Belgium)Average
Czech RepublicSlovak Republic
CanadaEstonia
DenmarkNetherlands
SwedenNorwayAustria
GermanyFinland
Source: Survey of Adult Skills (PIAAC) (2012)
Incidence of Field of Study MismatchPIAAC countries, 2012
Why does mismatch matter?
Mismatch can have various adverse effects
For individuals, firms and the economy:
• Lower aggregate productivity
• Lower wages for mismatched workers (field of study, over-qualification, over-skilling)
• Lower job satisfaction
• Sunk costs in skills system
Qualification, literacy and
field-of-study mismatch affect wages
Percentage difference in wages between overqualified, overskilled or field-of-study
mismatched workers and their well-matched counterparts
-30
-25
-20
-15
-10
-5
0
5
10
15
20
Over-qualified(Ref: same qualifications, well-matched job)
Overskilled in literacy(Ref: same skills, well-matched job)
Field-of-study mismatched(Ref: same field of staudy, well-matched job)
%
Source: Skills Matter (OECD, 2016)
Does field-of-study mismatch imply a
wage penalty?
The short answer: Yes, when it
also involves overqualification
Note: Path analysis with country fixed effects. Source: Survey of Adult Skills (PIAAC) (2012).
Field-of-study alone does not
carry wage penalty in most
countries
Literacy mismatch and productivity
0
2
4
6
8
10
12
0
5
10
15
20
25
30
35
40Percentage of workers with skill mismatch (LHS)
Gains to labour productivity from reducing skill mismatch (RHS)
Ensuring a balance between the supply and demand for
skills can help reduce wage inequality
• Wage inequality is lower in countries that are better at
matching skill demand and supplyThe impact of skills use on wage inequality
Percentage change in wage inequality (Gini) after imposing the distribution of numeracy proficiency
onto that of numeracy use
Mismatch can affect wage inequality
-7.9
-6.3
-4.6-4.2
-3.9
-2.6 -2.5-2.1
-1.3-1.1 -0.8 -0.7 -0.4 -0.3 -0.1
0.30.6
1.11.4 1.5
2.6
3.2
-10
-8
-6
-4
-2
0
2
4
NLD JPN KOR DNK EST ITA CAN IRL DEU POL USA BELᵇ FIN ESP AUT SVK CZE AUS FRA GBR ᵇ SWE NOR
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Est
onia
Eng
land
/N. I
rela
nd (
UK
)
Kor
ea
Irel
and
Pol
and
Can
ada
Uni
ted
Sta
tes
Spa
in
Ger
man
y
Cou
ntry
Ave
rage
Japa
n
Cze
ch R
epub
lic
Italy
Slo
vak
Rep
ublic
Net
herla
nds
Den
mar
k
Aus
tria
Fla
nder
s (B
elgi
um)
Fra
nce
Aus
tral
ia
Nor
way
Sw
eden
Fin
land
Productivity Education Unemployment
The cost of field-of-study mismatch can
amount to more than 1% of GDP
Percentage of GDP
Highest share of costs comes
from productivity costs (wages),
most of which result from the
overqualification associated to
FoS mismatch (assumes a 50-
week work year)
Sunk education costs assume
that “lost” education amounts to
½ a year for ISCED 3 and 1 year
for ISCED 5.
“But Michael, the labour market
is awaiting you!”
• Skills mismatch appears to be less common than qualification or field of study mismatch
– Related to lower productivity levels
– But this could be a methodological artifact
• Field of study mismatch is quite common, though not really problematic unless it leads to overqualification
– Workers who move horizontally without having to downgrade do not suffer any penalty and may not be less productive in the other field
• Over-qualification brings a sizeable penalty in the field and a bigger one outside the field
What we know about mismatch
What do we know about the causes of mismatch?
Literacy
proficiency and
qualification
mismatch
Russian Federation³
Finland
Germany
Netherlands
Sweden
Japan
Denmark
Austria
Spain
Slovak Republic
United States
Cyprus¹ ²
Ireland
Estonia
Average
England/N. Ireland (UK)
Italy
Norway
Australia
Poland
Czech Republic
Canada
Korea
France
Flanders (Belgium)
-15 -10 -5 0 5 10 15 20
Under-qualified minus well-matched Over-qualified minus well-matched
Score point difference
Labour market dynamics predict over-
qualification
Workers fired or dismissed in the context of business closures are more likely to be over-qualified at re-employment than workers who quit
– Effect stronger if job separation occurs at times of rising unemployment
The longer the time spent out of work between two jobs, the higher the risk of over-qualification, suggesting skills obsolescence
• Saturation: there are too many graduates from
this field and fewer jobs in the corresponding
sector
– Roughly: Number of graduates from the field
Number of workers in that sector
• Skill transferability: skills from the field are
transferrable / valued in other sectors
– Roughly: Number of skills well-matched in that sector
Number of FoS mismatched in that sector
What causes field-of-study mismatch?
Does saturation and transferability predict
field of study mismatch?
The short answer: YES
Graduates from more saturated
fields are more likely to be
mismatched (and overqualified)
Graduates from fields with more
transferability are more likely to
be mismatched and well qualified
Note: Path analysis with country fixed effects. Source: Survey of Adult Skills (PIAAC) (2012).
Demand-side factors often less well understood
than supply-side ones
Findings on skills use are in line with findings on
mismatch:
• More frequent skills use associated with higher wages
• More frequent skills use associated with higher job
satisfaction
• Higher skills use associated with higher labour
productivity at the sector/country level
The role of skills use at work
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Level 1 orbelow
Level 2 Level 3 Levels 4and 5
Literacy
Ind
ex
of
us
e
Reading at work Writing at work
Use of skills at work by proficiency level
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Level 1 orbelow
Level 2 Level 3 Levels 4and 5
Numeracy
Numeracy at work
Most frequent use = 5
Less frequent use = 1
Most frequent use = 5
Less frequent use = 1
OECD Average
Factors explaining the variance of skills
use at work
The contribution of skills proficiency and other factors to the variance of
skills use at work
0
10
20
30
40
50
60
Use of reading at work Use of writing at work Use of numeracy atwork
Use of ICT skills atwork
Problem solving skills atwork
Firm size Occupation IndustryHigh-Performance Work Practices (HPWP) Skills proficiency Country fixed effects
Skills use is associated with the use of High
Performance Work Practices at work
DefinitionAspects of work organisation – team work, autonomy, task discretion, mentoring, job rotation, applying new learning;
Management practices – employee participation, incentive pay, training practices and flexibility in working hour
Résultats More frequent skills use at
work is associated with the use of High Performance WorkPractices
Variables used in PIAAC: Flexibility in the sequence, order, speed of tasks Organising own time and activitiesCo-operating with others Instructing, teaching or training othersSharing information with othersManagement practices: working time flexibility, training participation, bonuses
Reverse causality : many HPWP enable and/or motivate workers to use their skills better, but employers may apply HPWP particularly to jobs requiring intense use of information processing skills.
The use of HPWP varies significantly across
countries
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
0
5
10
15
20
25
30
35
40
45
A. HPWP - All factorsShare of jobs with high HPWPᵅ and mean HPWP score
Percentage of jobs with high HPWP (left) Mean HPWP index (right)
a) Share of workers in jobs where the summary HPWP is above the top 25th percentile of the
pooled distribution.
Source: Employment Outlook (2016)
Promote linkage between education provision and labour market needs– Skills assessment and anticipation systems linked to the definition of
vacancies
Promote skill transferability so that FoS mismatch does not bring about over-qualification– Competency-based occupational frameworks
– Flexible re-skilling programmes
– General education
Encourage firms to adopt High Performance Work Practices that:– Increase internal flexibility to adapt job tasks to the skills of new hires;
– Promote a better allocation of workers to tasks; and
– Provide incentives for workers to deploy their skills at work more fully
Policy-relevant messages
• Getting Skills Right: Country reviews on skills anticipation systems and policies to address mismatch and shortage
• Getting Skills Right: Indicator of skills imbalances
– Follow wage, employment and talent pressures
– Link occupations to specific skills
• Survey of Adult Skills: Development work for Second Cycle
– Improve measures of skills mismatch
– Improve measures of skills use
– Better understand work organisation through expanded module and employer survey
What the OECD is doing:
Contact: [email protected]
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Website: www.oecd.org/els
BLOG: https://oecdskillsandwork.wordpress.com
Thank you for your attention
