Forecasting future skill needs in Europe

In early 2008, the European Centre for the Development of Vocational Training published a medium-term forecast on future skill needs in Europe. Based on existing Eurostat data, the report focuses on the methodological challenges, as well as on the main results of the research. One of the main findings is that the trend of increasing skill requirements remains despite the fact that jobs requiring few formal qualifications are also expected to increase.

Background to study

At the core of the Lisbon Strategy is the aim to make the European Union the most competitive economic region of the world. The transition to an innovative knowledge-based economy is likely to have considerable effects on the demand side of the labour market, particularly with regard to the qualifications needed. Even today, the mismatch between qualifications offered and those demanded by employers is one of the major labour market problems. Pressure to tackle this problem will increase in the light of globalisation, accelerated by technological change and the shrinking workforce because of demographic change.

Consistently, the EU has declared the need to identify new skills, and it has made this task a political priority on several occasions in recent years (see several documents on the European Commission website relating to ‘Education and Training 2010’).

In 2004, the European Centre for the Development of Vocational Training (Cedefop) established ‘Skillsnet’ as a European network on early identification of skill needs. As a result of discussions within Skillsnet, Cedefop initiated a project for a medium-term forecast of occupational skill needs in Europe based on available data. In early 2008, the report entitled ‘Future skill needs in Europe – Medium-term forecast (978Kb PDF)’ was published.

Methodology

The study covers the 25 EU Member States (EU25) – before the accession of Bulgaria and Romania in 2007 – plus Norway and Switzerland. It is based on Eurostat data already available, mainly taken from national accounts and the European Union Labour Force Survey (EU LFS). One of the major aims of the Skillsnet project was to develop a new framework ‘for producing regular detailed and consistent, quantitative projections of future skill needs across the whole of Europe’ (p. 11 of the report). The project team chose a modular approach for its quantitative model including three main elements:

  • a multisectoral macroeconomic model to get consistent projections of employment levels by sector or industry;
  • occupational and qualifications expansion demand modules to translate the employment projections from the multisectoral model into implications for the demand for skills;
  • a replacement demand module which focuses on modelling the skill demand resulting from the fact that people who are leaving the labour market for retirement or other reasons have to be replaced.

The study was planned as a step towards an integrated European system for early identification of skill needs. Therefore, the development and critical examination of the methodological apparatus were just as important as the actual results of the forecast. The report reflects this by concentrating extensively on data issues, technical problems and the solutions that the research team finally adopted.

It is argued that projection of future skill needs is an extremely complex undertaking. The report highlights several cautions with regard to skill needs forecasting – such as not taking ‘political and behavioural aspects of all actors involved’ adequately into account – and underlines the possible limitations of the approach chosen.

Main findings

The overall context for future skill needs in Europe remains the structural change of the European economy which is characterised by a shift away from agriculture and traditional manufacturing industries towards services and knowledge-based sectors. Some EU Member States are more advanced in this process than others but they are all moving in the same direction. Hence, this creates considerable occupational and sectoral mobility needs for employees. In this regard, the following three main results of the study are worth highlighting:

  • 13 million more jobs by 2015. Despite the loss of over two million jobs in the agriculture, mining and quarrying, and manufacturing sectors, a net increase of more than 13 million jobs is expected between 2006 and 2015;
  • growing demand for high and medium-skilled workers. The net employment increase in Europe of over 13 million jobs comprises increases of almost 12.5 million jobs at the highest qualification level (International Standard Classification of Education (ISCED) levels 5 and 6) and almost 9.5 million jobs at medium level (ISCED level 3 and 4), with a sharp decline of 8.5 million jobs for those with no or few formal qualifications (ISCED levels 0 to 2);
  • a simultaneous increase in the number of jobs requiring little or no formal skills. As low-skill jobs in retail and distribution, as well as some elementary occupations, are expected to rise, a certain polarisation of jobs is forecast. This refers to possible future problems of job quality, growing social inequality and social exclusion.

Commentary

The Cedefop report addresses an important and rather complex issue: modelling the future demand side of the labour market in order to allow the political system to influence the structure of the supply side, thus averting possible mismatches of workers to jobs. Despite the fact that the report represents the first ‘consistent and comprehensive medium-term projections of employment and skill needs across the whole of Europe’, much work still needs to be done to produce a robust European skill forecast. Some of these issues will be discussed further in a more detailed background report which is due to be published in late 2008 or early 2009. Next steps will include intensive debate with national experts about the refinement of the framework model and about the improvement of the database. Due to the known deficits of the present study, the authors have been well-advised to be reluctant in giving definite recommendations for policymakers.

Rainer Trinczek, Technical University Munich

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