The research leading to these results has received funding from the European Union Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 613256.

Research project discussion WP5: Mismatch: Skills and Education WP6: Mismatch: Migration Glenda Quintini Senior Economist Employment Analysis and Policy division at OECD 31 March – 1 April 2014 This project is funded by the European Union under the 7th Framework Programme for Research – Contract No. 613256

Work packages very topical and represent key contributions to existing literature Discussion of four issues dealt with by WP5 and WP6, in light of OECD findings on youth and mismatch: Drivers of mismatch, including labour market institutions and recruitment methods (5.1 and 5.4); Comprehensive view of school-to-work transitions for young people (5.2); Students’ work in low-skilled jobs (5.3); Causes of mismatch among migrants (6.4 and 6.2) 19/11/2018 www.style-research.eu

Drivers of mismatch, including labour market institutions and recruitment methods WP 5.1 and WP 5.4 promise to provide support for some preliminary findings by OECD based on cross-section analysis on the Survey of Adult Skills (PIAAC): Forthcoming OECD study (fall 2014) looking at school-to-work transitions: Examines the impact of four skill areas on labour market outcomes: Skill areas: information processing skills, generic skills, education, field of study Labour market outcomes: the likelihood of being NEET and hourly wages; Compares coefficients but also contribution of each skill areas to the variance of hourly wages Sheds light on three types of mismatch (in education, skills and field of study). It looks at: Whether different forms of mismatch overlap; How their importance changes across age groups; How their impact on skills use and wages varies with age Correlates returns to skills and their adjustment over time with labour market institutions and job characteristics 19/11/2018 www.style-research.eu

Drivers of mismatch, including labour market institutions and recruitment methods Findings so far: Countries with rigid wage setting institutions and high labour costs skills tend to have lower return to information processing skills; Higher wage floors may also slow down the process of adjustment of returns to skills after hiring. Returns to skills are also lower in temporary and part-time jobs as well as jobs with smaller firms; But temporary contracts appear to be used as a testing ground for employers to learn about skills which are then better rewarded after conversion to a permanent position. OLS regression pooling all countries, including the following additional controls: yeas of education, field of study, gender, age, industry and occupation dummies and student status. The Level at which wage bargaining takes place is measure by an indicator as follows: 1, bargaining takes place primarily at the local or company level; 2, intermediate or alternating between sector and company bargaining; 3, bargaining predominantly takes place at the sector or industry level; 4, intermediate or alternating between central and industry bargaining; 5, bargaining predominantly takes place at the central or cross-industry level and there are centrally determined binding norms or ceilings to be respected by agreements negotiated at lower levels. Minimum wage settings are also measured by an index as follows: 0, no statutory minimum wage, no sectoral or national agreements; 1, minimum wages are set by collective agreement or tripartite wage boards in some sectors; 2, minimum wages are set by national agreement between unions and employers; 3, national minimum wage set by agreement but extended and made binding by law or Ministerial decree; 4, national minimum wage is set through tripartite negotiations; 5, national minimum wage is set by government but after non-binding tripartite consultations; 6, minimum wage set by judges or expert committee, as in award-system; 7, minimum wage set by government but government is bound by fixed rule (index-based minimum wage); 8, minimum wage set by government, without fixed rule. The tax wedge refers to a single person without children earning 67% of the average wage in each country. 19/11/2018 www.style-research.eu

Incidence of different types of mismatch by age group Drivers of mismatch, including labour market institutions and recruitment methods WP 5.4 what type of skills reduce the extent of mismatch – assumes an overall assessment of mismatch and exploration of determinants of that but: Is self-reported skill mismatch (REFLEX measure) a good overall assessment of all three types of mismatch? Probably yes Could look at evidence of different types of mismatch from other sources OECD study shows: Incidence of different types of mismatch by age group Field of study and qualificaiton mm two most sizeable sources of mismatch Over-qualification declines with age Field mismatch that is a source of over-qualification – hence wage penalty and skill underuse – declines but simple field mismatch increases Over-skilling declines with age over-skilling is more common among youth, it is also a source of larger wage penalties and skills under-use for this age group 19/11/2018 www.style-research.eu

Comprehensive view of school-to-work transitions for young people WP 5.2 will shed light onto school-to-work transitions in a more comprehensive way than just looking at length. OECD work shows that this is key: Length of school-to-work transitions – several measures: Actual time between school leaving and first job from longitudinal data (from country-specific panels) – ad-hoc updates + latest mostly available in Jobs for Youth country studies; Calculations based on cross-section data (LFS) – e.g. median age of entry into employment minus median age of school leaving; pseudo cohort methods (up to date – see Quintini and Martin SEM WP 154); Methods incorporating the job-stability dimension – Quintini and Manfredi, 2009, SEM WP 90 19/11/2018 www.style-research.eu

Comprehensive view of school-to-work transitions for young people Pathways identified with Optimal Matching data-driven technique to explore dataset and discover or confirm underlying patterns without priors based on economic theory. Application to school-to-work transitions: Construct individual sequences of main activity statuses – trajectories – over 5 years after leaving high school. Monthly statuses must be mutually exclusive so sequence is unambiguous Measure distance between trajectories using the number of steps involved to make sequences equal Group most similar trajectories and interpret group as distinct school-to-work pathway By assessing the transition phase globally, results allow discriminating between first jobs that are stable or just a short breaks in pathway dominated by NEET; Applied to US (National Longitudinal Survey of Youth, 1997) and Europe (ECHP); Shows need to study transitions over the first few years on the labour market 19/11/2018 www.style-research.eu

Comprehensive view of school-to-work transitions for young people e.g. Express and In-and-Out in US take same time to find first job (3 weeks difference) but In-and-Out more NEET spells and time in NEET e.g. even Disconnected find work (2.5 years) but still spend most of their time in NEET (50 months) Express pathway 19/11/2018 www.style-research.eu

Comprehensive view of school-to-work transitions for young people Could look at how labour market and educational institutions influence the transitions – entry but also progression on the labour market; Very tentative link with apprenticeships and labour market duality from Quintini and Manfredi (2009): Share of youth in selected pathways 19/11/2018 www.style-research.eu

Students’ work in low-skilled jobs WP 5.3 interesting but possibly a bit narrow – why not look at actual graduates? OECD work (Quintini, 2014) using Survey of Adult Skills shows in many countries few students work, although tertiary students are significantly more likely to reconcile work and study, except for countries with strong apprenticeship systems But confirms higher likelihood of over-qualification for working students (69%) compared to similar workers (30%) based on their on-going qualification but not based on their highest qualification (30% and 29%) – hence, match based on highest qualification which could cause crowding out Share of students who work, including apprenticeships, vet and other working students Share of students who work, by educational attainment 19/11/2018 www.style-research.eu

Causes of mismatch among migrants WP 6.4 very interesting, particularly the section attempting to identify links between wage setting systems and labour market regulation and migrants’ labour market outcomes. OECD work suggests that credential recognition policies and other education-related issues play the biggest role. Possibly worth exploring this as well. Less clear how labour market institutions would affect migrants differently from natives. Xenogiani (2014) uses Survey of Adult Skills to see what explains differences between migrants and natives in the value of their skills in the labour market. The author tests: Supply-side explanations: Language difficulties. Skills acquired in different countries are not equivalent (different quality of schooling, different curricula, different labour market conditions, etc). Migrants don’t get their degrees recognised. Demand-side explanations: Employers have incomplete information about foreign qualifications and face difficulties evaluating foreign credentials. Discrimination (statistical or taste based). 19/11/2018 www.style-research.eu

Causes of mismatch among migrants Literacy and numeracy proficiency are important determinants of overqualification Differences in literacy and numeracy proficiency between migrants and natives account for about 30% and 26% respectively of the overqualification gap 19/11/2018 www.style-research.eu

Causes of mismatch among migrants Foreign university degrees are less valued than those acquired in the host country Wage returns to tertiary education, by country of acquisition of degree 19/11/2018 www.style-research.eu

Causes of mismatch among migrants Education and professional experience acquired abroad are strongly discounted in the host-country labour market in comparison with those acquired domestically: Need to encourage recognition and certification of experience in addition to education credentials obtained abroad. International students: a potential pool of migrants with good literacy scores and better labour market outcomes than those who migrate after completing their studies. Scope for policies that select younger people who have acquired little experience before migrating? Literacy proficiency is higher and labour market outcomes are better for migrants who arrived as young children and completed their education in the host country: policies that facilitate and encourage rapid family reunification in families with young children. 19/11/2018 www.style-research.eu

Thanks! Glenda.QUINTINI@oecd.org This project is funded by the European Union under the 7th Framework Programme for Research – Contract No. 613256