Over-qualification of workers may lead to increasing mismatch between skills supply and demand

The latest European Skills Forecast is launched today in Brussels by CEDEFOP (the European Centre for the Development of Vocational Training), providing updated supply and demand projections in the labour market.

The forecast finds that the supply of those with higher-level qualifications in the EU may be growing faster than demand, highlighting the tension between the provision of skills by the education and training sector and the needs of employers.

While the problem of over-qualification of young graduates may be resolved in the long term, as the effects of the crisis unwind, the immediate prospects are for over-qualification for many people employed in both high and low-skill occupations.

Compiled for CEDEFOP by a cross-disciplinary consortium, including Cambridge Econometrics, the forecast runs to 2030 and “acts as an early warning mechanism to help alleviate potential labour market imbalances and support different labour market actors in making informed decisions”, according to CEDEFOP.

The challenges faced by EU member states to ensure prosperity through low unemployment rates, are varied and complex.  In the space of a couple of generations work has largely moved from activities which require little or no skill to jobs which requires a much higher level of skills.

However, there is evidence to suggest that skills ‘gaps’ remain, i.e. the skills people possess do not match those required by employers.

Furthermore, trends such as ‘zero hours’ contracts and long-term demographic changes such as an increasingly ageing population also present particular challenges for policy makers.

Structural challenges also remain, particularly in the Southern European countries which are still grappling with the fall-out of the sovereign debt crisis (primarily Portugal, Italy, Ireland, Greece and Spain) where unemployment remains high.

Mike May-Gillings, Associate Director at Cambridge Econometrics, said:

In order to respond effectively to these challenges, which can vary greatly from one member state to another, it is critical that policy makers understand how demand for skills changes over time, based on the best analysis of the available data.

We collaborate with Warwick Institute for Employment Research (IER), Economix, Alphametrics, ROA and The Vienna Institute for International Economic Studies (wiiw) to do just that by compiling and continually updating the CEDEFOP Skills Forecast.

Other key findings of the forecast launched today, include:

• There is a strong need for the supply side of the market (skills providers) to be better informed about the demand side (employers) trends
• A risk of over-qualification highlights the tension between demand and supply trends.
• While the problem of over-qualification of young graduates may be resolved in the long term, as the effects of the crisis unwind, the immediate prospects are for over-qualification for many people employed in both high and low-skill occupations
• A gradual expansion of the labour supply (with strong growth in Luxembourg, Ireland, Norway, Switzerland and Iceland but a sharp decrease in Bulgaria, Latvia and Lithuania)
• By 2030, EU28 employment is expected to increase by 15m – employment declines are expected in Germany, Estonia, Latvia, Lithuania, Bulgaria and Croatia driven by an aging population and/or outward migration
• Service sectors will continue to support the fastest employment growth
• Predicted employment trends will drive a continued polarisation (a hollowing out of medium-skill occupations, such as skilled manual workers in agriculture)
• Occupational change is being driven by changes in the sectoral employment mix, and also by technological changes within sectors
• Substantial shifts in task requirements are projected – a more polarised occupational structure driven by strong growth in lower wage jobs
• Trend towards more autonomy, less routine, more Information and Communication Technology (ICT), less physical tasks and more social and intellectual tasks over the forecast period to 2030
• As older workers retire, 158 million new job openings are expected by 2030.