Page 9 - IDEA Study 10 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.

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