Skills utilisation – analysis across countries and occupations. Western European and postsocialist countries comparison
After 30 years of economic transition in post-socialist countries, qualifications and skills mismatch is still the most important issue affecting the labour markets in this part of Europe. The same applies to the Western European countries. Although the unemployment in EU-15 states is generally low, there is still a problem with structural unemployment, i.e. a mismatch between supply and demand for a specific type or level of qualifications (Kocor, 2017). It has a negative impact on productivity, the individuals’job engagement, and pay satisfaction.
The supply of occupations is an effect of people’s decisions concerning their career development and the possibilities given by the educational system. One of the commonly used predictors of skills mismatch is the wage level and wage growth in various occupations. The OECD argues that ‘the analysis of wage dynamics, usually referred to as "wage pressure”, is one of the most powerful tool[s] available to measure the tightening of the labour market in specific occupations and, as such, to detect skills imbalances’ (OECD. 2017, p. 32).
Following this statement, the main aim of this chapter is, on the one hand, to prepare an occupational matrix for each analysed country incorporating wage growth and wage level indicators and compare these matrixes between selected Western European and post-socialist countries and on the other hand to look for similarities and differences in the skills use on these markets. In particular, we analysed how the skills mismatch translates to skills underutilisation on these markets. We also believe that such analysis can help us understand the migration processes between European countries. The assumption here is that the people whose occupation is classified as low paid and surplus in the origin country and, at the same time, high paid and shortage in the country of destination might be the most willing to migrate. The study is conducted for 16 Western European and post-socialist countries for the period 2008-2016.
Our main conclusion is that the occupational matrix differs between countries. However, there are some regularities as far as the skills utilisation is concerned. Namely, there are a lot of similarities between post-socialist countries that visibly distinguish this group from the Western European countries. It indicates that in terms of labour utilisation, the process of convergence between post-socialist countries and Western European countries is still not fully completed, despite the open borders within the EU.
The chapter is organised as follows. In the first part we review the literature concerning skills utilisation, which is a broad concept and can be explained differently. We show the main definitions and methods of analysis derived from the literature. The second part of the chapter is dedicated to the construction and analysis of the occupational matrix, which illustrate the skills utilisation in the analysed countries. Using two indicators, namely the wage level and wage growth, we have divided the analysed 47 occupational groups into four large categories: (1) high paid and shortage, (2) high paid and surplus, (3) low paid and shortage, and (4) low paid and surplus. In the third and fourth sections we analyse the subjective measures of qualification match and pay satisfaction in these four groups of the matrix. The first conjecture here is that the biggest over-qualification and the lowest satisfaction would be in surplus and low-paid jobs. This group mainly deals with the 'wage penalty' phenomenon widely described in the literature. The second conjecmre is that under-qualification and high satisfaction would be in high-paid shortage professions. Thus, we try to show the skills mismatch in two dimensions. The first dimension is objective and is given by a classification of each occupation into one of the four cells of the matrix using the data on wages. The second one is given by subjective qualification mismatch within the occupational matrix.
Skills mismatch - a literature review
If a workplace does not match an employee's qualifications, the acquired human capital cannot be utilised entirely and therefore converted into expected returns because such an employee is not optimally productive (Kracke, Reichelt, & Vicari, 2017, p. 6). To analyse the qualification mismatch, and labour utilisation in general, the US National Commission on Employment and Unemployment Statistics proposed in 1978 the Labour Utilisation Framework (LUF), developed later on by ILO (ILO, 2008; Sullivan & Hauser, 1978).1 LUF indicated four forms of underutilisation: unemployment, inadequate utilisation by hours of work (insufficient hours), inadequate utilisation by the level of income (a wage that is not adequate to meet basic needs), and a mismatch of education and occupation (inadequate use of skills; Sullivan & Hauser, 1978, p. 26). The data for the United States in 1960-1976
showed that the biggest growth of inadequate utilisation was in the fourth group, i.e. the mismatch of education and occupation (Sullivan & Hauser, 1978, p. 45).
Starting from the publication of LUF, the discussion concerning skills utilisation has been increasingly lively. The recent literature distinguishes between qualification mismatch (vertical mismatch) and the field of study mismatch (horizontal mismatch; Montt, 2017; Quintini, 2011a; Sloane, 2003). Indicators of qualification mismatch measure the alignment of a worker's formal qualification level to the required level in her or his job. When workers' educational level is above the requirements, we talk about 'over-qualification', and when it is below, we talk about 'under-qualification'. Indicators of a mismatch concerning the field of study measure the alignment between a worker’s specialisation (the field of smdy) and the field in which the worker is employed (OECD, 2018, p. 23).
Empirical evidence derived from the literature shows that all forms of mismatch (i.e. the vertical and the horizontal one) can have negative consequences for both workers and the entire economy (OECD, 2018, p. 23; Romero & Salinas- Jimanez, 2018). The literanire highlights that, on average, the over-qualified and field of study-mismatched workers suffer a wage penalty when compared to well-matched workers with the same level of formal qualifications (Brynin & Longhi, 2009; Hartog & Sattinger, 2013; Kracke et al., 2017, p. 6; Levels, Van der Veldeu, & Allen, 2014; McGuinness & Pouliakas, 2017; OECD, 2018, p. 3; Quintini, 2011a, 2011b; Wolbers, 2003). Furthermore, the field-of-study mismatch explains a lower level of satisfaction at work (Beduwe & Giret, 2011; OECD, 2018, p. 3), and it generates a higher job turnover, as unsatisfied workers tend to move often in a search for a better job match.
It is important to notice that the demand for specific qualifications varies by occupation, because human capital is mostly specific (Kracke et al., 2017, p. 6). However, in the literature we can find a lot of studies concerning qualification mismatch, but most of them are done by industry (e.g. De Pedraza, Tijdens, & Visintin, 2016; Roosaar, Masso, & Varblane, 2019) or highly aggregated occupational groups e.g. high-, medium-, and low-skilled occupational groups (OECD, 2018). Taking into account that an occupation reflects a special sort of skills and the required level of education (as it is presented in the ISCO classification2), it is worth conducting an analysis concerning skills utilisation by focusing on the demand and supply for particular occupations3 (e.g. 4-digit level of ISCO classification).