Abstract

Abstract This paper considers the education of the labour force based on an analysis of trends in and the relationships between job polarization and skills mismatch. Both job polarization and skills mismatch have become topics of increasing interest, but relationships between the two have been relatively neglected in the literature. We argue that the relationship between polarization and skills mismatch is an empirical matter, which we analyse at both the macroeconomic and microeconomic level in European countries. A novel job polarization index (JPI) is proposed to measure imbalanced job polarization. It takes into account not only the change in the share of medium-level jobs, as is typical for measuring pure polarization, but also the imbalance between the change in high-level and low-level jobs. Skills mismatch at macro-level is measured by a skills mismatch index (SMI), while traditional measures of undereducation and overeducation are used at the microeconomic level. At the macroeconomic level, we estimate a system of two equations, one for each of the country-level variables gauging polarization and mismatch, respectively. Imbalanced job polarization measured by the JPI negatively affects skills mismatch at the macroeconomic level (SMI), but there is no significant reverse effect. Thereafter we consider the microeconomic level and study the determinants of mismatch using multi-level mixed effects logistic models. The effect of imbalanced job polarization on individual-level mismatch was arguably favourable for individuals in non-crisis time, decreasing overeducation risk although also increasing the chances of undereducation, both gauged using the normative measure, but unfavourable during the global financial crisis of 2008–2009 and the following two years.

Highlights

  • An adequately educated and trained labour force is essential for economic growth

  • We have argued that the relationship between polarization and skills mismatch is an empirical matter, which is dependent on the prevailing levels of skills mismatch, supply responses to changes in the demand for educated workers and the pace of imbalanced job polarization – the extent to which the share of high-skill jobs and low-skill jobs grow relatively to each other at the expense of mediumskill jobs

  • We introduced a job polarization index, and used a skills mismatch index at the macroeconomic level alongside traditional measures of overeducation and undereducation at the microeconomic level

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Summary

Introduction

An adequately educated and trained labour force is essential for economic growth. Education and training raise the productivity of workers and create capacity to innovate and adopt new technologies. This paper considers the education and training of the labour force based on an analysis of trends in and the relationships between job polarization and skills mismatch. Both job polarization and skills mismatch have become topics of increasing interest, but most of the literature has focused either on skills mismatch or on job polarization, and not on possible relationships between the two. Starting from a hypothetical steady state in the labour market in which the supply of education and skills perfectly matches demand, and all jobs are fulfilled by adequately trained workers, polarization would have several effects that could increase skills mismatch.

Determinants of Job Polarization and Skills Mismatch
Measures
Trends
Results
Polarization and Macro-Level Skills Mismatch
Polarization and Individual-Level Skills Mismatch
Conclusions and Discussion
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