Skill mismatch concerns half of the workers

Having the right skills is essential in order to gain a firm foothold in the labour market and increase a country’s productivity. In July 2020, the European Commission launched a new strategy to give workers the right skills. In Luxembourg, the government developed a Skills Strategy as part of the coalition agreement for the 2018-2023 period. This strategy should help to create a better match between workers’ skills and the needs of the labour market.

A reduction in feelings of skills mismatch among resident workers since 2005…

In 2015, 46% of Luxembourg resident employees said that their skills did not match those required for their jobs (42% for all European Union countries). Like the majority of EU28 countries, this proportion has fallen since 2005, and is down 6 percentage points (pp.). However, this drop is less pronounced than in some countries, such as France (-11 pp.) and Croatia (-18 pp.).

… coupled with an increase in the feeling of being under-skilled

In Luxembourg, employees’ skills mismatch is primarily a problem of being over-skilled (25% of resident employees) rather than of being under-skilled (21% of resident employees). Since 2005, these groups have not changed in the same way. While the proportion of employees describing themselves as over-skilled has fallen over the period (39% and 25% respectively), it has increased among employees who say they are under-skilled (14% and 21% respectively).

Having skills that are in line with employers’ needs is an essential element in ensuring workers can quickly enter the labour market and retain a firm foothold in it. However, as a result of rapid changes (globalisation, the introduction of new technology, etc.) and of friction within the labour market, many workers are in jobs where there is a mismatch between their skills and the position’s requirements.

Governments and international organisations have recently understood the scale of the phenomenon. In July 2020, the European Commission launched a new strategy to give workers the right skills. In Luxembourg, the government developed a Skills Strategy as part of the coalition agreement for the 2018-2023 period. This strategy should help to create a better match between workers’ skills and the needs of the labour market.

Skill mismatch concerns half of the workers

The proportion of workers whose skills do not match their position is calculated by measuring the percentage of employees who believe that:

- either they do not have sufficient skills to properly perform their job and to fulfil the duties that their role requires: these are under-skilled workers;

- or they have skills that exceed the level required for their role, and these skills make them capable of performing more complex tasks: these are over-skilled workers.

In 2015, in Luxembourg, 46% of resident employees believed that their skills did not match those required by their job. This level is higher than the average observed for the European Union (42%). However, it is comparable to the levels seen in Germany and France (45%).

Workers resident in Luxembourg are slightly more likely to describe themselves as over-skilled (25% in 2015) than under-skilled (21% in 2015). This trend is seen in the majority of European countries. Compared to Luxembourg, however, the average difference between the two groups for all European workers is more marked: 27% feel themselves to be over-skilled, and 14% under-skilled.

A drop in feelings of skills mismatch hiding different trends among the over-skilled and the under-skilled

Like most European countries, the proportion of workers who believe their skills are mismatched with their job’s requirements has fallen over the last decade in Luxembourg: between 2005 and 2015, skills mismatch dropped by 6 percentage points (pp.). This drop, however, is less pronounced than in some countries, such as Croatia (-18 pp.), Portugal (-12 pp.), and France (-11 pp.).

The proportion of employees who believe they are under-skilled and the proportion of those who believe they are over-skilled have not changed in the same way.

Between 2005 and 2015, the proportion of employees who described themselves as over-skilled fell in the majority of European Union countries. This reduction was fairly significant in Luxembourg, where it reached -13 pp., placing it fourth among countries where feelings of being over-skilled have dropped the most, after France (-20 pp.), Croatia and Sweden (-14 pp.).

However, the proportion of employees who feel they are under-skilled has risen. This rise is particularly noticeable in Luxembourg (7 pp.). Luxembourg is also fourth among countries where the proportion of employees who feel they are under-skilled has risen the most, after Sweden (10 pp.), Estonia and France (9 pp.).

While the drop in the number of workers who feel they are over-skilled attests to a better allocation of resources in the labour market, the simultaneous increase in the number of workers who feel they are under-skilled is concerning, as it demonstrates skills mismatch from the bottom up. While in the past, workers could cope with an increase in the skills required for their role thanks to their being over-skilled, it seems that this is more difficult today. This trend is particularly strong in Luxembourg and France. This phenomenon could have a significant impact on the economy in future, as the labour market is moving towards fast-changing professions that require workers to develop their skills. This rise in the level of skill required and the increasingly technical nature of roles appears to have taken shape between 2005 and 2015, and has simultaneously led to a drop in the number of workers who believe themselves to be over-skilled and an increase in the number of those who think themselves under-skilled.