Page 9 - IDEA Study 10 2015 Skills Mismatches

1. Introduction Qualified labor force is an important factor for future growth and competitiveness of the Czech economy. A large part of skills is acquired through education. However, concerns have been raised recently that the current structure of skills and qualifications produced by the educational system does not meet the labor market needs. In many European countries, current developments on the labor market pointed to the likely presence of labor market skill mismatch. The Beveridge curve moved outwards in many countries to the situation with higher vacancy rate, but unchanged levels of unemployment rate, suggesting that the qualification structure of the unemployed does not correspond to the qualifications demanded by employers (European Commission, 2012). This study analyzes how skills supplied by the Czech labor force match up with skills demanded by the labor market. It first examines the educational structure of the Czech population by levels and fields of education, and how it changed over the past twenty years. It also studies the impact of the changing education structure on the unemployment rates of graduates, providing some suggestive evidence about matching efficiency of the Czech labor market. The aggregate efficiency of the labor market matching is then studied at the aggregate level with the Beveridge curve, which illustrates the evolution of job vacancy and unemployment rates. Further, the study analyses the qualification mismatches at the individual level, focusing on both vertical and horizontal mismatches. This study takes advantage of the Czech Labor Force Survey (LFS) data for years 1994 to 2014 provided by the Czech Statistical Office, which is a large quarterly dataset providing detailed individual-level information about highest level of education, main field of study,3 detailed occupational classification as well as information about socio-demographic characteristics of the surveyed individuals. Furthermore, this study takes advantage of the Ad-hoc module of the Czech Labor Force Survey data collected in 2014, which focused on labor market situation of migrants and their immediate descendants and included a specific question concerning the over-qualification of individuals to their current occupation. This dataset thus allows analysis of aggregate trends in education structure of the population, unemployment trends, but also evaluation of both horizontal and vertical education mismatches at the individual level. 3 The Labor Force Survey data is the only representative survey conducted in the Czech Republic, which includes information about main field of study of respondents, and thus allows studying the horizontal skills mismatch. Unfortunately, the LFS data do not include information about incomes of respondents. Therefore, the impact of horizontal mismatch on earnings cannot be studied in the Czech Republic. 5