Occupational Demand Survey An Introduction Jan Rutkowski Washington, DC; February 2, 2016

Objective To present an instrument to collect information on demand for skills Occupational Demand Survey Piloted by the World Bank in Georgia in 2015

Outline Introduction Survey design and implementation Sample results Motivation: why studying demand for skills is important Different approaches to determining future demand for skills Skills anticipation Trend extrapolation Survey design and implementation Main issues Product vision Sample results

Introduction

Motivation & context Two main questions asked by policymakers: How to determine future demand for skills How to effectively match supply of skills with demand for skills?

Answers to these two questions are needed to improve labor market performance Reduce structural unemployment Excess supply of certain skills Remove obstacles to firm growth Skill shortages

Different approaches to answering the two questions Question 1: How to determine demand for skills Occupational projections (forecasts) Time-series extrapolation Question 2: How to address skills mismatch Manpower planning Administrative regulation of labor supply to match expected future occupational profile of labor demand Information on demand for skills provided to stakeholders

Analysis of recent trends is an efficient alternative to occupational projections Trend extrapolations Occupational projections Assumption: recent trends representative of future developments No major shocks to the economy Time series data on employment & wages by occupation Results refer to narrowly-defined occupations Relatively accurate in short- to medium-run Numerous assumptions Input data availability and quality Sophisticated modelling techniques Results refer to broad activities & occupations Not necessary reliable and accurate Efficient = simpler & less costly Trend extrapolation can be complemented by expert opinion

Information is more effective in adjusting supply to demand than manpower planning Information about returns to different fields of study helps students make informed choices Employment prospects (easy/difficult to find a job) Expected wage Manpower planning proved ineffective and went out of fashion Unsuccessful administrative regulation of labor supply People have right to make free careers choices Restriction on access to fields of study incompatible with market economy Fast changes in skills demand due to technological progress Increasing occupational mobility People switch career fields Informed – not necessarily optimal from the macroeconomic perspective The assumption that once policymakers know the future demand for skills then can adjust supply and thus solve the unemployment problem proved to be an illusion.

Survey design and implementation

Survey objective & Main questions Objective: To determine demand for different occupations & job prospects associated with different career choices What are the shortage occupations? What are the hiring prospects for different occupations? Number of firms hiring Job openings & wage offers How difficult is it to fill a vacancy? If difficult, why? How is the demand for skills evolving? Which occupations are growing? Which are declining?

Users of survey’s results Students – to choose field of study Jobseekers – to learn about job prospects in different occupations Educational & training institutions – to know what are skills demanded by the market and to adjust program offerings accordingly Career Advisory Services – to provide effective job counseling and career guidance Public Employment Services – to provide effective job search assistance and counseling Government ministries – to formulate education and employment policies

Main indicators of occupational demand Employment Employment growth points to growing demand But lack of employment growth can indicate labor shortage despite demand growth Wages Wage growth points to growing demand But possibly also to skills shortage Job vacancies Unmet demand for labor Vacancy duration matters But can be high in high job turnover occupations Subjective assessment by employers Shortage occupations Reasons for difficulty filling job vanacies Lack of applicants vs. lack of skills Lack of applicants = occupational shortage Lack of required skills = skills gap

Survey design: key decisions Occupational coding (ISCO 08) – level of detail 2–digit – 40 occupations 3-digit – 120 4-digit -- 430 Sample size – the more detailed occupational coding the larger the sample Sample size drives survey cost Sampling method Booster sample of large firms Large firms are more likely to hire Weights to make results nationally representative Risk of assigning high weights to small number of observations Questions Temptation to ask employers about future employment But prospective questions difficult to answer (“don’t know” is the most frequent answer)

Survey implementation: numerous pitfalls High implementation capacity is prerequisite for quality results Well trained enumerators familiar with ISCO Mapping job descriptions to ISCO is difficult High risk of mis-coding Errors during data entry Logical and consistency checks are important Intensive guidance for implementing firm to ensure survey quality

Product vision: Occupational Outlook For every occupation information available in regional break-down on: Firms indicating occupational shortage Number of firms hiring Number of vacancies & vacancy rate Wages offered Change in employment (absolute and percentage) over last 12 months Planned change in employment in next 12 months Input into LMIS & Jobs Portal

Occupational Outlook: Example Top 5 occupations where most job were created (net employment increase) Employment change, persons Employment change, % Vacancies Vacancy rate Wage offers (median) Health professionals 5,801 8% 473 0.5% 400 Teaching professionals 3,354 3% 818 0.7% 300 Health associate professionals 2,117 20% 45 0.4% Sales workers 2,007 6% 899 2.3% 250 Customer service clerks 1,394 5% 292 0.9% Ranking occupations by number of jobs created

Georgia Results: Examples

Labor demand varies by region Firms experiencing labor shortage, % Firms having job vacancies, %

Shortage occupations

10 Occupations hiring the most

The top 10 hardest jobs to fill

Lack of required skills is predominant reason hiring is difficult Occupation Lack of applicants Applicants lack required skills Applicants demanded higher wages Applicants did not like working conditions 1 Sales workers 96 2 Personal service workers 3 Refuse workers and other elementary workers 85 6 4 Health professionals 8 90 5 Teaching professionals 25 73 Legal, social and cultural professionals 30 62 7 Food processing, wood working, and garment workers 23 67 Business and administration associate professionals 12 87 9 Administrative and commercial managers 10 Business and administration professionals Lack of applicants = occupational shortage Lack of required skills = skills shortage/gap

Job openings

Shortage occupations

Wages offered

Fastest growing occupations: net job creation

Fastest growing occupations: Highest % change in employment Karolina: Street sales workers? How many of them are there?

Fastest declining occupations: Net job destruction

Interpreting the results Employment growth vs. vacancy rate Interpreting the results

Employment growth and vacancy rate are not necessarily correlated Employment growth rate Vacancy rate Low High Dynamic equilibrium Demand driven shortage Static equilibrium Supply driven shortage Dynamic equilibrium: supply keeps pace with demand, g(D) = g(S) Static equilibrium: D = S & g(D) = g(S) = 0 Demand driven shortage: demand outpaces supply, g(D) > g(S) Supply driven shortage: S < D D = E + V S = E