Information and Job Search

Why matching skills supply with the current and future labour demand matters
Skills are a critical asset for individuals, businesses and societies. The importance of skills is
even more pronounced in a dynamic, globalized world. Building basic skills early on, by
broadening and improving the quality of early childhood, is essential. But it is also crucial to
ensure that skills taught at school are relevant for the working world; that they are maintained
and further improved during working life; and that they are recognized and used by employers
once people are in the labour market.
Matching skills and jobs has become a high-priority policy concern. Skills mismatches occur
when workers have either fewer or more skills than jobs require. Some mismatch is inevitable, as
the labour market involves complex decisions by employers and workers and depends on many
external factors. But high and persistent skills mismatch is costly for employers, workers and
society at large. Skills mismatch has become more prominent in the global economic crisis.
However, it is primarily a structural issue and as such existed prior to the recent global economic
slowdown. For the same reason, contrary to what some commentators believe, current record-
high unemployment rates cannot be attributed to skills mismatch.
Many employers report difficulties in finding suitably skilled workers. Although part of these
difficulties are related to skill gaps and deficits in specific sectors, occupations and regions, they
are mostly explained by factors other than skills, such as uncompetitive wages, unattractive
working conditions, poor recruitment policies and/or mismatch between the location of
skills and jobs. As a result, many shortages could be addressed by changes in training and
recruitment practices, as well as by facilitating labour mobility.
A more worrying phenomenon is sizeable qualification mismatch. Affecting workers, firms and
the overall economy, qualification mismatch occurs when a worker’s qualification level is higher
or lower than that required by the job. Although the match between what people can actually do
and the content of their jobs may improve over time, qualification mismatch can be persistent
and leave an adverse or “scarring” effect on an individual’s career. In addition, unused skills will
atrophy, resulting in a partial loss of the (initial) investment in them. Even when adjustment
takes place, it may be costly and prevent the adoption of new technologies.

Adopting a “matching skills” approach during the crisis means providing the right skills needed
in the labour market, while generating the necessary economic dynamism to generate new jobs.
Apprenticeships and the provision of workplace training can help both young people and the
unemployed to build links with the labour market and gain useful work-related skills. Knowledge
clusters, in which companies adopt innovative product market strategies and interact with
educational institutions, can foster the creation of skill-intensive jobs and a better match with
workforce skills. Labour market policies should focus on building the human capital of the low-
skilled unemployed. For this, a shift is required from the “work-first” approach, often used in
activation strategies, to a “learn-first” process primarily through workplace learning,
emphasizing the retraining or skills upgrading of job seekers with poor skills and low
qualifications. In the current context of weak labour demand in a number of countries, this could
potentially improve the match of job seekers’ skills with those skills likely required by jobs
created once the recovery strengthens. Reducing skills mismatch with lasting effect and helping
economies make the most of their workforce skills require collaborative effort from all
stakeholders. First, action is needed to reduce the gap between knowledge generated in the
educational system and the skills demanded by employers. Second, continuing intervention is
necessary during the employment life cycle, targeting continuous skill development and use.
Different types of skills mismatch coexist in modern labour markets. In market economies,
product markets influence labour demand, and skill requirements are driven by employer choices
in designing jobs
Foe example, which tasks are delegated, which can be substituted by technology, which rely on
nonroutine tasks). Job candidates and potential employees also come to the labour market with
varying knowledge, competencies and abilities that can be broadly defined as “skills”, or the
outcome of individuals’ choices of education, training and of their work experience, combined
with innate abilities and preferences.
The process of matching diversely skilled job seekers with available vacancies is not automatic.
Imbalances between the supply and demand for people with different skills exist in all economies
and are sometimes inevitable. Part of any observed skills mismatch is the consequence of
individuals’ initial educational and occupational choices, and of typically imperfect information
about opportunities in the labour market. In addition, labour markets are dynamic and
characterized by information asymmetries. As a result, different types of skills mismatches
coexist, including skill shortages, qualification mismatches and skill gaps
Skill shortage - Demand for a particular type of skill exceeds the supply of people with that
skill at equilibrium rates of pay.
Qualification mismatch - The level of qualification and/or the field of qualification is
different from that required to perform the job adequately.
Over-(Under-) qualification/ education - The level of qualification/education is higher
(lower) than required to perform the job adequately.
Skill gap - The type or level of skills is different from that required to perform the job
adequately.
Over-(Under-) skilling - The level of skill is higher (lower) than required to adequately
perform the job.
Skills mismatch has significant economic and social cost for individuals, overskilling or
overqualification means unrealized expectations, lower returns on investment in education, lower
wages and lower job satisfaction. For firms, it actually may reduce productivity and can increase
the staff turnover rate. At the macroeconomic level, this contributes to structural unemployment
and reduces growth in gross domestic product (GDP) through workforce underutilization and a
reduction in productivity. But in addition to efficiency losses, these mismatches entail significant
equity costs, as young people, migrants and those working in part-time and fixed-term jobs are
more affected by skills mismatch.

Skills mismatch is also a dynamic phenomenon affecting employees within their jobs and across
their entire working careers, particularly if they fail to upgrade their skills and face skill
obsolescence. Continuous adaptation of workers’ skills to changing job demands depends on
opportunities to learn on the job and to receive continual training at work. Skill development and
mismatch must therefore be considered over an individual’s life cycle – namely, basic skills
being developed at school, complemented by the accumulation of work-related (practical and
generic) skills and accompanied by retraining and new-skill acquisition in line with changing
technologies.
Skill matching requires a collaborative long-term strategy
Effectively reducing skills mismatch requires creation of a comprehensive long-term strategy,
one involving public-private partnerships among governments, employers and unions to
continuously develop and improve the use of skills. Bringing education and the working world
closer together is necessary for success. A coordinated strategy is required that builds solid skills
through high quality education while involving all relevant stakeholders in the skill-matching
process throughout an individual’s life. Other than learning on the job, work-based and job-
specific skills are difficult to acquire.
Preparing young people to successfully enter the labour market therefore requires cooperation
between public and private sectors, so that education can respond to labour market needs and
provisions are made for opportunities to learn in the workplace. Guiding students in choosing
their fields of study, promoting their transition from school to work and maintaining and
improving skills throughout their working lives will ensure that the full potential of those skills
are exploited and the needs of enterprises are effectively met.
Consequences of Skills mismatch
‘skills mismatch’ refers to a lack of matching between the skills that are available in (or supplied
to) the labour market and the skills that are in demand in the labour market. However, skills
mismatches take many forms, and the term can be used to refer to a variety of situations where
individuals are over- or under-qualified or skilled for a job (vertical mismatch); where firms are
not able to attract the right skills or where there is a genuine lack of adequately skilled people
(skill gaps, skill shortages, horizontal mismatch); or to individuals with skills that have become
obsolete
Causes of skills mismatch in contexts of high informality and under-education/skilling In regions
like Sub-Saharan Africa and South Asia, the main factors behind the shortfall in skills or / under-
education of people in the informal economy are
• The low education base of people – this reduces labour mobility, the chances of finding a
formal job, and (as skills beget skills) opportunities for further education and skill acquisition.
• Unequal access to training - residence, gender, and household consumption or income are
factors correlated with access to skills. Access is also affected by previous educational
attainment as well as simply the lack of options that exist.
• Underdeveloped markets for skills – these rely on informal sources of information, often from
friends and family, rather than reliable and comparable information about the quality of skills
development opportunities offered in the informal economy (e.g. informal apprenticeships).
• Lack of attention from public training providers to the needs of the informal economy –
providers are slow to respond and don’t usually deliver training in ways that are accessible to
those in the informal economy. • Constraints to training among small and household enterprises
of the informal economy (e.g. opportunity cost of one person going on training in a 2-person
enterprise, or a lack of suitable training options for those working full time).

General response to skills mismatch in contexts of informality

• Policy coherence – ensure that skills policies are aligned horizontally and vertically across
skills delivering ministries, and aligned horizontally with policies that influence the demand for
skills (e.g. agriculture, trade, industry, employment).
• Deploy appropriate financing mechanisms – financing skills is not just about securing a large
enough resource envelope to pay the bills. Different financing mechanisms can be deployed to
incentive and influence the behaviour of individuals, enterprises, whole sectors, as well as
education and training providers.
• Build strong foundational and transferable skills in families and schools - tackling skills
mismatches starts in the early years; without adequate basic foundational and transferable skills,
individuals will likely suffer exclusion and skills mismatch later in life.
• Reform formal training providers to reach the informal economy - providers need to reorientate
their training offering (in terms of content, delivery, duration) so that they better meet the needs
of those in the informal economy.
• Recognize skills gained in the informal economy – a lot of skills are acquired in the informal
economy (via apprenticeships or experientially on the job) but are usually not recognised,
making it hard for such individuals to take up formal employment even if they have the
proficiency to do it.
• Enhance horizontal and vertical mobility – ease of movement within the skills system (and
movement into and out of, and back into the system) would help individuals and enterprises
navigate the changing demand for skills.
• Combine skills provision with complementary interventions – it is not enough that there is a
match between skills supplied and skills demanded; individuals often need help to put their
acquired skills to use and evidence shows that providing skills alongside complementary
interventions (e.g. enterprise start-up support, access to credit etc) is the most effective approach.
• Improve the knowledge base on skills mismatches in the informal economy - Data is critical.
Without reliable and quality information (and capacity to analyse it) on the composition of the
informal economy in a country, the type of skills mismatch may be hard to define. Similarly,
without an understanding of the full context within which the skills (mis)match exists, it may be
hard to diagnose the mitigation measures (e.g. a low skills equilibrium is a skills match, but

What is skill anticipation?

Individuals, businesses, training organizations and governments all have to make decisions about
what education and training investments they need to make now in order to maximize the future
return on those investments. This means assessing the future prospects on the labour market and
the potential imbalance between the demand for and supply of skills. There is no one agreed
definition of skills needs anticipation, and the term is often used interchangeably with “early
identification of skills needs”, “skills needs assessment” or “forecasting”.
In a broad sense, skills needs anticipation refers to activities to assess future skills needs in
the labour market in a strategic way, using consistent and systematic methods. The aim of
these activities is not to provide exact numbers of workers, classified by types and levels of
qualifications, who will be required in the future, and their outcomes should not be interpreted
this way. Skills needs anticipation does not and cannot answer questions such as: “How many
welders trained to a certain level/ with certain qualifications will be needed at this or that
location at this date?” Rather, skills needs anticipation aims to provide information to all labour
market actors about potential future skills.

Methods of skills needs anticipation

As well as identifying past and current trends, the anticipation of skills needs clearly requires a
future focus. The trends identified, and various other pieces of intelligence, can be combined and
projected to reflect potential future outcomes in different ways.
• quantitative employment projections by sector and occupation, based on macroeconomic
modelling, referred to as “forecasts”;
• qualitative methods, including focus groups, round tables, expert interviews, foresights and
scenario development;
• surveys among employers, i.e. establishments or enterprises;
• tracer studies of school/training graduates and school-to-work transition surveys.

Why skill anticipation is important

Despite increased spending on education and training and increasing educational attainment,
countries around the world are experiencing a persistent gap between the skills demanded and
those available. For example, globally around one in three employers say they have trouble
filling vacancies because of the lack of appropriately skilled applicants.
Skills mismatch exacts high economic and social costs at all levels – individual, business and
government – and is both a result and a contributory cause of structural unemployment.
A number of factors are influencing the global evolution of skills demand and supply, and if left
unaddressed they are likely to contribute to skills mismatch in the future.
• Demographic changes influence labour supply in different ways in developing and developed
countries. In developed countries the population is ageing, while in developing countries large
numbers of young people are entering the labour market every year. These changes require that
young people have appropriate skills which attract investment and create jobs, while older
workers continue to learn and upgrade their skills.
• The level of educational attainment has increased significantly in recent decades in both
developed and developing countries. This means that more talent is available for employers, but
also makes it harder for lowerskilled workers to find jobs in an increasingly competitive labour
market.
• With globalization and trade liberalization, the availability of suitably qualified workers has
become a determining factor in many foreign investment decisions
Technology development and innovation increase the demand for higher-level skills, and
accelerate the rate of change in skills demand.
Climate change and the transition to the green economy influence skills demand through the
introduction of new green technologies, new market opportunities in green economic activities
and the “creative destruction” of brown jobs, and various policy and regulatory requirements.
These processes change the skills requirements within existing occupations, give rise to new
occupations and skills needs, and increase the need for retraining and skills upgrading, including
in environmental awareness.