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This paper explores the link between skill and qualification mismatch and labour productivity using cross-country industry data for 19 OECD countries. Utilising mismatch indicators aggregated from micro-data sourced from the recent OECD Survey of Adult Skills (PIAAC), the main results suggest that higher skill and qualification mismatch is associated with lower labour productivity, with over-skilling and under-qualification accounting for most of these impacts. A novel result is that higher skill mismatch is associated with lower labour productivity through a less efficient allocation of resources, presumably because when the share of over-skilled workers is higher, more productive firms find it more difficult to attract skilled labour and gain market shares at the expense of less productive firms. At the same time, a higher share of under-qualified workers is associated with both lower allocative efficiency and within-firm productivity - i.e. a lower ratio of high productivity to low productivity firms. While differences in managerial quality can potentially account for the relationship between mismatch and within-firm productivity, the paper offers some preliminary insights into the policy factors that might explain the link between skill mismatch and resource allocation.

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This paper explores the relationship between skill mismatch and public policies using micro data for 22 OECD countries from the recent OECD Survey of Adult Skills (PIAAC). Results suggest that differences in skill mismatch across countries are related to differences in public policies. After controlling for individual and job characteristics, well-designed product and labour markets and bankruptcy laws that do not overly penalise business failure are associated with lower skill mismatch. Given the negative relationship between skill mismatch and labour productivity, reducing skill mismatch emerges as a new channel through which well-designed framework policies can boost labour productivity. Skill mismatch is also lower in countries with housing policies that do not impede residential mobility (e.g. transaction costs on buying property and stringent planning regulations). Greater flexibility in wage negotiations and higher participation in lifelong learning as well higher managerial quality are also associated with a better matching of skills to jobs.

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This paper extends earlier OECD work [indexed in VOCEDplus at TD/TNC 121.532] exploring the link between skills mismatch, productivity and policies to include the countries in the second wave of OECD Survey of Adult Skills, with a special focus on New Zealand. We find that the percentage of workers who are mismatched in terms of skills is 28 per cent in New Zealand, slightly over the OECD average of 25 per cent. The share of over-skilling is at the OECD average of 18 per cent, while the share of under-skilling - at around 10 per cent - is also above the OECD average of 7 per cent. The results suggest that improving the allocation of skills to OECD best practice could be associated with an increase in productivity of around 7 per cent in New Zealand.

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The shift to a net zero economy brings great advantages, but managing transition costs, like job displacement, is critical. While the direct impact on jobs in coal-fired power plants may be relatively small in a dynamic labour market, the localised impacts of these closures and the political salience they have may motivate additional government intervention. We use microdata, to compare the earnings of coal-fired power plant workers made redundant to the broader labour market, to demonstrate the value of microdata in shaping future structural adjustment policies as plant closures loom. While our findings aren't causal, they highlight three key patterns: (1) Redundant workers experience a substantial earnings drop in the year after redundancy, earning 43 per cent less; (2) Coal-fired power plant workers face an even larger earnings decrease, with a 69 per cent drop in earnings in the year following redundancy; and (3) Relative earnings losses persist over time: after four years, coal-fired power plant workers earn 50 per cent less, compared to 29 per cent for other workers.

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The need to rapidly decarbonise economies raises questions about whether countries' workforces possess the requisite skills to achieve the net zero transition as well as the capacity to redeploy workers from 'brown' to 'green' jobs. This paper applies a task-based framework to granular data from the Occupational Information Network (O*NET) and country-specific employment sources to generate new indicators of the green skills structure of labour markets for a large number of OECD countries and non-OECD EU countries.

Significant cross-country differences emerge in the underlying supply of green skills and the potential of economies to reallocate brown job workers to green jobs within their broad occupation categories. In a majority of detailed brown occupations, workers have in principle the necessary skills to transition to green jobs, with the exception of those in production occupations, who may require more extensive re-skilling. In contrast, workers from most highly automatable occupations are generally not found to have the sufficient skills to transition to green jobs, suggesting more limited scope for the net-zero transition to reinstate labour displaced by automation.

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This paper explores the effects of labour market conditions at graduation on an individual's work-life over the following decade. Australians graduating into a state and year with a 5 percentage point higher youth unemployment rate can expect to earn roughly 8 per cent less in their first year of work and 3.5 per cent less after five years, with the effect gradually fading to around zero ten years on. The magnitude of this effect varies according to the characteristics of the individual and the tertiary institution they attend. We then explore the mechanisms behind this scarring. Scarring partly reflects the subsequent evolution of the unemployment rate - the fact that unemployment shocks tend to persist - highlighting the potential for timely and effective macroeconomic stabilisation policies to ameliorate these scarring effects. More generally, job switching to more productive firms emerges as a key channel through which workers recover from adverse shocks that initially disrupt (worker-firm) match quality. We find some evidence that the speed of recovery has slowed since 2000, which is consistent with the decline in labour market dynamism observed in Australia over that period.

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This paper explores in detail the effects of the economic recession associated with the [Coronavirus Disease 2019] COVID-19 pandemic on the youth labour market in Australia. We first posit a conceptual framework to identify the potential channels through which the COVID-19 recession may impart scarring effects on young Australians. The framework is based on both historical and international evidence about the labour market outcomes of young people during recessions. Such scars work through four channels: (1) losing the next rung on the job ladder - lower mobility and match quality; (2) delayed labour market entry; (3) investing in the right skills - human capital and skill loss; and (4) psychological scarring. We then use this conceptual framework to examine the labour market outcomes of young Australians during the initial economic shock in 2020 and the subsequent recovery in 2021. We look for early evidence of COVID-related scarring in the Australian youth labour market using a range of timely and granular datasets, including the Household Income and Labour Dynamics in Australia (HILDA) Survey, and the Longitudinal Labour Force Survey (LLFS). In our analysis, we define young people as those aged between 15 and 24 years. Disadvantaged people are defined as those in the bottom decile of the 2011 Socio-Economic Indexes for Areas (SEIFA) index of economic resources. We measure disadvantage at the individual level, rather than by geographic region, to capture the fact that levels of disadvantage vary within regions.

Through this analysis we identify four specific groups of young Australians that have not shared in the benefits of the economic recovery and are most vulnerable to such long-term scarring effects. Policies should thus be designed to consider the needs of: (1) young workers who are not well matched to their jobs; (2) young people who have not been working for a sustained period, including the long-term unemployed and those not in the labour force; (3) young people who have not been working and not studying, particularly men aged between 20 and 24 years; and (4) young students who have been disproportionately affected by school closures and the shift to remote learning. A companion paper, 'Preventing scarring in the post-pandemic youth labour market' [available in VOCEDplus at TD/TNC 149.520], examines the potential policy responses to mitigate these impacts on the youth labour market. Taken together, this research is expected to provide an evidence base for policy actions to mitigate the scarring effects of the pandemic on the employment outcomes and welfare of young Australians.

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The term ‘neighbourhood effects’ refers to the situation whereby residential location impacts on the social outcomes of individuals, above and beyond what would be expected from their personal and family characteristics. This study models the probability of unemployment as a function of personal characteristics, family structure and neighbourhood composition. In particular the focus has been on the relationship between concentrations of socio-economic disadvantage and advantage and the probability of being unemployed during early adult labour market experience. The principle finding is that neighbourhood composition does appear to affect the labour market outcomes of Australian young people. Show less

The Australian labour market has rebounded strongly from the initial shock of the [Coronavirus Disease 2019] COVID-19 pandemic and the youth unemployment rate is close to a record low. But history teaches us that recessions can impart 'scarring effects' on the careers of young people for years after the event. This paper explores policies that may prevent scarring of young people's career prospects in the post-COVID world, and in the face of future economic downturns. Such scars work through four channels: (1) losing the next rung on the job ladder - lower mobility and match quality; (2) delayed labour market entry; (3) investing in the right skills - human capital and skill loss; and (4) psychological scarring. In this paper we consider policies to ameliorate these scarring effects by addressing unnecessary skill loss and reducing the barriers associated with discrimination or information asymmetries in the labour market. Furthermore, in this paper we investigate the risk that individuals from different backgrounds will end up not in employment, education or training (NEET). Several groups of young individuals that are vulnerable to economic shocks including: those with a NEET history, those not completing Year 12 education, those having a disability or long-term health condition, and Aboriginal and Torres Strait Islanders.

The paper also raises the possibility that some policy interventions can unintentionally raise barriers to labour market entry by imposing additional costs on employers or reinforcing discriminatory practices. As a result, the policy areas discussed constitute priorities for further investigation to limit labour market scarring from both the pandemic and future economic downturns. Given these types of barriers, the priority policy directions that warrant further investigation are: (1) rethink [vocational education and training] VET and occupational licencing: increase job mobility and opportunities for young workers by increasing the flexibility of apprenticeships and introducing national standards for occupational licencing; (2) remediate COVID impacts: provide education based 'catch-up' services to remediate skills lost due to the impact of the pandemic on education and work time; and (3) simplify and integrate services: improve the integration and navigability of disability support programs.

A companion paper, 'The effect of the COVID-19 recession on the youth labour market in Australia' [available in VOCEDplus at TD/TNC 149.521], uses timely and granular information on the Australian youth labour market to identify groups that are vulnerable to scarring.

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