A Polarised Labour Market in a Polarised Society Miroslav Beblavý (CEPS), Lucia Kurekova (SGI), Ilaria Maselli (CEPS), Barbara Vis (VU), Frank Vandenboucke (KUL)

Introduction Polarisation of what? Context How is each group (low/middle/high skilled) changing in the process?

A Polarised Labour Market

Is it happening? Low qualified jobs Medium skilled jobs High skilled jobs Medium skilled jobs The UK plus other 16 countries Belgium plus other 7 countries Low qualified jobs

The shrinking middle: routine workers Pay a penalty for doing a routine job Even though they became more sophisticated (trained, use a pc, educated, etc), the penalty for a routine job increased between 2000 and 2010 => the owner of the capital captures a bigger share of income

Consequences of job polarisation A risk of skills mismatch > a new problem: excess of middle skilled workers! Higher income inequality Lower social mobility

The Low-Skilled Segment

Questions Who are the low-skilled across Europe? What skills do employers seek in low and medium skilled jobs?

Low-skillness is diverse across EU The character of low-skillness differs across- countries South-Eastern Europe versus Central and Eastern Europe Even within a country, same education level leads to different labor market outcomes Age/experience, gender, ethnicity, nationality

Low-skilled job are demanding A wide range of skills and characteristics are listed in vacancies for low-skilled occupations Experience matters nearly everywhere Service sector occupations typically demand more non-cognitive skills than other types of occupations

Demand in low-skilled jobs is diverse Labor demand across countries differs in importance given to cognitive skills versus other skills (cognitive versus non-cognitive) No universal type of demand or synchronized shift towards other skills Domestic institutions and structures shape very strongly how demand is structured

Summary The character of low-skill job has changed during the past decades: a variety of skills is requested from workers Diversity in low-skilled supply and demand across Europe

Policy implications Education and skill formation policy - importance of experience is likely to grow Labor migration policy and migrant integration policy - tool to address rising inequalities and fast-changing skill needs More targeted policies and interventions might be necessary - growth of socio-economic inequalities along ethnic, gender and age lines

The High-Skilled Segment

As quantity increases...(1): lessons from the expansion of secondary education Upper secondary sectors expanded at different speeds in different countries General education tended to grow at the expense of vocational education (the position and popularity of vocational schooling has been diverse across countries) As the enrollment rates exceed 80%, the generalization of the upper secondary schooling seems to have spilled to the bachelor studies Although elite, mass and universal access to education are analyzed as sequential stages of educational expansion, expansion can reproduce social stratification

As quantity increases…. (2) WHAT to study more important than IF ItalyFrance HungaryPoland Net Present Value of Education, 5 years from graduation, male students. Average = 100

Which Social Policy Fits such a Shift? From the micro to the macro level!

Are Social Investment Policies the Answer? Combine “old” re-distribution with investment Relatively cheap – Increase in, say, childcare spending of 0.5% of GDP is highly visible Can increase both economic growth (increased labor participation) and quality of labor force (through human capital development)

Compensating & capacitating social spending, 2007

Wrap-up and Possible Future Developments Job polarisation and polarisation between countries Educational expansion likely to continue Public finance constraint as well….if social investment is added, how will the investment be done? Risks of social / intergenerational conflict (higher education fees)

“It is not open to question that, by closer coordination, the existing social services could be made at once more beneficial and more intelligible to those whom they serve and more economical in their administration”. William Beveridge, from the Beveridge report (1942) (page6) We are not the firsts to worry about these issues!

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