The demand for skills in the labour market is undergoing substantial change as a result of trends such as technological progress, globalisation and population ageing. At the same time, developments such as increased labour market participation of women and greater migration flows have altered the supply of skills.
In light of these changes, it is becoming increasingly important to ensure that the skills of workers and individuals are aligned to the needs of the labour market. Skills imbalances, such as shortages (when adequate skills are Hard-to-Find in the current labour market) or surpluses (when certain skills are In Excess in the labour market relative to the demand) can slow the adoption of new technologies, cause delays in production, increase labour turnover and reduce productivity. Individuals who do not possess the “right” skills would also face poor labour market outcomes.
The OECD Skills for Jobs Database provides country-level (and subnational) information on the alignment between the demand and supply of a wide range of dimensions, including cognitive, social and physical skills disaggregated into more than 150 job-specific Knowledge areas, Skills and Abilities and for more than 40 OECD countries and emerging economies.
Skills are defined as hard-to-find (or in shortage) when employers are unable to recruit staff with the required skills in the accessible labour market and at the going rate of pay and working conditions. Skill surpluses arise in the opposite case, when the supply exceeds of demand for a given skill.
The indicators measuring skill shortage and surplus are constructed on the basis of signals extracted from five sub-indices:
• wage growth,
• employment growth,
• hours worked growth,
• unemployment rate,
• under-qualification growth
In a nutshell, the OECD Skills for Jobs indicators exploit time series values for the above-mentioned sub-indicators across 33 occupational groups (ISCO-08 2digit). For each indicator and occupation, the time series is compared to the corresponding economy-wide trend to detect whether each specific occupational group is growing/shrinking with respect to the rest of the economy and by how much. This strategy allows identifying whether jobs in each occupational group are hard-to-fill (i.e. in shortage, where firms struggle to find workers with adequate skills) or not (i.e. in surplus, whereby skills are easy to find and no recruitment bottlenecks emerge).
If, for instance, wages in the occupational group of “Science and Engineering Professionals” grow faster than average wages across occupations in a given country, this signals shortages. In other words, employers compete with one another and use wages to attract scarce talent and workers to the advertised jobs. Similarly, when average hours worked in a specific occupation grow faster than the country average, this signals that employers might be facing hiring difficulties and, as a consequence, are being forced to increase the work hours of their current employees to satisfy rising demand.
No single sub-index provides, on its own, a perfect signal of skill needs. Wage growth, for example, might be driven by collective bargaining agreements, rather than by skills imbalances and employment growth may signal demand for labour, but not necessarily a shortage of skills. By combining five sub-indices into one final indicator, the impact of conflicting signals is minimised and the power of the final indicator amplified.
The aggregation of the five sub-indicators provides a ranking of occupations that are hard or easy to fill. Skill requirements are then mapped onto each occupation to obtain imbalances at the skill level. This yields a measure of the direction (excess or hard-to-find) and the intensity of labour market demands for more than 150 dimensions of Skills, Knowledge areas and Abilities.
Download the data Getting Skills Right: Skills for Jobs indicators (for more details on the methodology) List and Definitions of Knowledge areas, Skills and Abilities OECD Skills and Work Blog