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Article Excerpt
Abstract
The accuracy of the match between a worker's talents, skills, and capabilities and those required by his or her job has seldom been addressed in the empirical literature. However, a number of analyses on the match between workers' education levels and those required by jobs have been published over the last 10 years. Obviously, the level of formal education completed by workers is more easily observed than their levels of human capital competences. Indeed, the latter would be rather difficult to observe. Nonetheless, this approximation is not straightforward, since formal education is only a mean for the acquisition of some human capital competences. We cross-examine the education match and the competence match between the supply and the demand of labor in Spain with data from 1998. Our results suggest that both types of matches do differ in their incidence, determinants, and wage consequences. (JEL J24, J31)
Introduction
The accuracy of the match between a worker's education and his or her job has attracted the attention of economists over the last two decades. The main reason for this interest is that education-job mismatches have relevant effects on the efficiency of the public and private investment in education by influencing wages as well as on other labor market outcomes such as labor turnover [Hersch, 1991] and job satisfaction [Tsang and Levin, 1985]. The analysis of wage effects of education-job mismatches has generated a body of literature initially developed under the human capital approach [Duncan and Hoffman, 1981]. The empirical results, however, are sometimes interpreted in support of other theoretical approaches, such as the assignment models [Sattinger, 1993] and the so-called "search and matching" theory [Hartog, 2000].
Nonetheless, the analysis of the matching between education and jobs based on the notion of an adequate match as a one-to-one relation involves a very rigid view of optimal allocation of workers to jobs [Hartog and Oosterbeek, 1988; Jovanovic, 1979, 1984; Barron and Loewenstein, 1985; Topel, 1986]. It suggests the existence, for each level of education, of an optimum job level and implies that the allocation to any other job level is necessarily suboptimal. In this sense, job level is a variable that reflects the complexity of a job, which can be expressed either as required education or as the required competence level of a worker. Increasingly, both firm managers and policy makers are focusing on the relevance of human capital competences, which have been defined as those talents, skills, and capabilities of employees that contribute to multi-factor productivity gains [Hartog, 1992]. Other things being equal, workers with sufficient and up-to-date competences are more productive and have more potential to remain employed than other workers [Buchel, 2002]. Formal education is one of the mechanisms through which people can acquire human capital competences. Consequently, investment in schooling can widen or compress ability differences among individuals, resulting in widened or compressed differences in the levels of competences [Tyler et al., 2003; Neumark and Wascher, 2003; Ishikawa and Ryan, 2002]. If the education-job match is not optimal, additional learning by training and job experience are needed to improve or adjust the initial competences acquired during education. Indeed, the importance of on-the-job training for improving competences has long been emphasized [Becker, 1964; Mincer, 1974; Aragon, 1998], and there has been discussion about its impact on productivity and wages [Brown, 1989; Lynch, 1992; Acemoglu and Pischke, 1998; Pischke, 2000].
To measure individual productivity, the standard human capital specification [Mincer, 1958] only uses years of schooling as an explanatory variable in the earnings function and assumes uniform marginal returns to additional schooling years. Becker [1967] allowed for the marginal cost, and marginal benefit curves vary by individual abilities and family background. Using this model, Card [1995] discussed econometric issues of endogeneity, omitted variables, and measurement errors. In his approach, human capital competences are omitted variables hidden in the random coefficients of the schooling and earnings functions [Ashenfelter et al., 1999]. At a given time, human capital competences can have different values in different jobs [Hartog, 2001]. Over time, not only the relative value of competences but also their contents can change depending on technological and organizational developments. The introduction of new technology and new ways of organizing production change the nature of work, which affects the relative importance of various tasks [Vivarelli, 1995]. Some of the competences that workers have accumulated may become less relevant, while others may become more important [Saez et al., 2000]. Over time, these changes are deemed to induce upward biases in the demand for competences, increasing wage inequality [Autor et al., 1988; Berman et al., 1998; Acemoglu, 1998; Levy and Murnane, 1992].
"Education-job match" is understood as a situation in which a worker has completed the level of education that is exactly required by his or her job. "Competence-job match," in turn, is understood as a situation in which the worker has the right combination of human capital competences and, at the right levels, to perform proficiently in his or her current job. In the empirical literature, however, the analysis of the match between a worker's bundle of human capital competences and the requirements of his or her job is most often in terms of formal education only. The reason for this is that the level of formal education completed by workers is more easily observed than their levels of human capital competences. Sometimes, the analysis of the education match is the real purpose of researchers as it happens, among others, in Freeman [1976], Sicherman [1991], Alba-Ramirez [1993], Cohn and Khan [1995], and Vahey [2000]. In other cases, contrarily, research aimed at the study of the competence match uses only data on the education level completed by workers as a proxy for human capital competences levels, as it happens, among others, in Hersch [1995], Groot [1996], and Battu et al. [1999]. Thus, the approximation to the competence-job match through the education-job match does not appear to be a straightforward one since formal education is only the initial mechanism through which people can acquire and/or develop their stock of human capital competences. Additionally, the effects of education and competence mismatches in terms of labor market outcomes may be different. Allen and van der Velden [2001] provide support for this idea by reporting that educational mismatches are better predictors of wages than skill mismatches, although the latter explain much better job satisfaction and on-the-job search than the former.
This article aims at highlighting, both conceptually and empirically, the differences between education and competence labor market mismatches by exploring their incidence, their dependence of human capital variables, and their wage effects. The analysis provides the means to evaluate whether the education-job match is an acceptable approximation to the competence-job match as labor market phenomena.
The rest of the paper is organized as follows. The next section summarizes...
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