1. Challenges and Priorities for Skills Gap Analysis in the Western Balkans
Will Bartlett
LSEE – Research on South East Europe
London School of Economics

2. Outline Nature of skills mismatch and skills gaps
Stylised facts in developed market economies
Transition economics and structural change
Policy conclusions
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

3. Nature of skills mismatch
Skills gaps and skill shortages refer to the overall balance of demand and supply of labour with different level of skills, leading to unemployed workers and dissatisfied employers
This can be measured by employer skill-needs surveys
Employer surveys show high levels of skill shortages in some transition economies
Skills mismatch among employees may reflect over-education (within sectors) or mis-employment (across sectors)
Sometimes referred to as vertical vs. horizontal mismatch
Measured by employee surveys, labour force surveys
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

4. Skills mismatch in developed economies
Explanations for mismatch
Bounded rationality
Imperfect information
Imperfect mobility (regional mismatch)
Mismatch as a temporary phenomenon
On-the-job training
Career mobility
Both imply that mismatch should decline with age
Main problem in developed countries seems to be skills mismatch as a result of overeducation at individual level
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

5. Overeducation and wages
Studies of over-education in developed economies find strong evidence of wage penalty associated with overeducation
On average the wage penalty for over-education is around 15% (McGuiness, 2006)
Varying from 8% in Portugal (Kiker et al. 1997) to 35% in UK (Dolton & Silles 2008)
Bumping-down
Workers with higher education take jobs which require lower skills, while lower skilled workers have higher rates of unemployment (or work in informal economy)
In contrast, in transition economies main problem is often skill gaps and shortages at sector level
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6. Labour markets in transition economies
Intense labour market change in transition countries due to:
Collapse of former state-owned industries
Restructuring and growth of new service sectors
Globalisation and new technologies
Additionally in the Western Balkans:
Conflict and collapse of ex-Yugoslav market
All this led to problems in the labour market:
high long-term unemployment
youth unemployment
low employment rates
informal economy
deskilling of the workforce
emergence of skills gaps and shortages holding back growth
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7. Emerging skills gaps
Main constraints to business in later stages of transition:
Infrastructure
Skills gaps and shortages
Skill needs identified in employer surveys:
Communication skills, team work skills, attitudes to work, entrepreneurship skills, ICT skills
Increased demand for such generic skills due to:
Overall rapid structural changes in supply and demand for skills
Decline of manufacturing and growth of services sector
Skills gaps are often found in the higher range of qualifications while excess supply of (inappropriate) skills found in intermediate range of qualifications
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8. “Inadequate education is a serious obstacle to the firm” (%)
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9. Unemployment and education (%)
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

10. Skills mismatch in transition
Because of structural change, skill mismatch is a more permanent phenomenon in transition countries than in developed economies
Mismatch increases with age of workers
Initial mismatch could be overcome by on-the-job training or career mobility, but:
Employers reluctant to spend on training their workers ‘on the job’
Transaction costs of reskilling raised by lack of public infrastructure for life-long learning
Career mobility both between and within sectors is limited
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11. Serbia: employee training within firms (% of firms that carry out training)
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

12. Education systems and skills gaps
Given a legacy of high level of human capital, why have skills gaps emerged?
curricula developed under former system are unsuited to post-Fordist market economy
Skills are too specialised in obsolete occupations
Education methods often out-dated (rote learning)
Lack of education in transferable skills (soft skills)
Relatively low expenditure on education
Political economy of reform in education system
Reform resistance by teaching unions
Corruption in state system reduces education quality
Growth of private tertiary education with little quality control
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13. Public expenditure on education (% GDP)
IMF budget deficit requirements
Public expenditure on education
The crisis and austerity measures
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

14. Participation in Lifelong Learning (% of adult population aged 25-64)
28/03/2017
Participation in Lifelong Learning (% of adult population aged 25-64)
RCC Conference Sarajevo "New Skills for New Jobs" October 2011
Percentage of the adult population aged 25 to 64 participating in education and training (Eurostat online data)
Will Bartlett, LSE

15. Approaches to skills gap analysis
Analysis of administrative data
Used to analyse skills shortages at macro or sectoral level
Usefulness depends on quality of data collected by PES
Employer surveys
Used for analysing skills shortages at macro or sectoral level
Macro or sectoral forecasting models
Example: EU-wide analysis by CEDEFOP
Based on assumptions of equilibrium in markets
Based on projections of past behaviour into the future
Not good at dealing with rapid structural change
Employee surveys
Used for analysing skills mismatch at individual level
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

16. Skills surveys - Serbia
Statistics Office (RZS): employer survey of skills needs
Sample size: 2,500 employers
Performed only once
Other surveys (also one-off):
ILO survey on skills mismatch
USAID sector skills gap analyses in four sectors
IPA project employer survey (ongoing)
NES uses information from branch offices to develop local training programmes
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17. Skills surveys - Macedonia
Skills Demand Survey annually since 2006 (CARDS)
Sample size: 1,500 employers (covering 4.5% of firms and 48.5% of employees)
Provides medium-term information to the Employment Agency
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

18. Skill surveys Croatia Croatian Employment Office
Annual employer survey used to develop training programmes
USAID sector employer survey of ICT industry (2007)
Identified gap of 270 ICT specialists with university diploma each year (i.e. 42% of current number of graduates)
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19. Policy response (i): “supply-led” approach
Estimates of current skills gaps, or forecasts of future skills gaps, should inform changes in education and training curricula
Implementation through top-down adjustment of supply of skills to demand requirements
But depends upon ability of decision makers to use this information
Numerous problems with this approach:
Lack of incentives for education system to adjust
Lack of coordination between ministries
Lack of administrative capacity to carry out skills gap analysis
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

20. Policy response (ii): “demand-led” approach
Skills gaps emerge faster than planners can change the education system implies supply-led approach may be ineffective
The alternative is a decentralised approach which empowers employers and workers to make their own decisions
Competitive ‘quasi-market’ replaces central planning
‘Formula funding’ of schools and universities in which state funds providers on basis of their success in attracting students
Employers: training subsidies
Employees: training vouchers
Depends on also stimulating competition among providers
Reforms to permit entry of new private providers
These can be ‘social enterprises’ in order to maintain quality
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

21. Conclusion (i): uses and challenges of skills gap analyses
Providing better information for individual employers, job-seekers and careers guidance professionals
Developing new educational curricula in secondary and vocational schools
Developing participative local plans, engaging local employers and trades unions in design of new educational programmes
Challenges
Weak administrative capacities to carry out analyses
Slow certification and accreditation of new courses
Resistance to educational reforms
Unwillingness of employers to carry out on-the-job training
RCC Conference Sarajevo "New Skills for New Jobs" October 2011

22. Conclusion (ii): policy priorities
Create coordinating institutions
Joined-up policy making between ministries of economy, labour and education
Sector skills councils bringing together social partners to make use of skills gap analyses
Build administrative capacity within PES to carry out skills gap analyses and skill forecasts
Demand-led ‘quasi-market’ approach within the public sector
To empower workers and employers skill choices
Promote competition among training providers by encouraging entry of social enterprises
Publicly financed using training vouchers for employers and unemployed workers
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23. Thank you for your attention!
comments welcome at:
RCC Conference Sarajevo "New Skills for New Jobs" October 2011