Across countries, tackling skill mismatch and skill shortages is a major challenge for labour markets and training policies in the context of rapid and substantial changes in skill needs. In most countries, a substantial share of employers complain that they cannot find workers with the skills that their businesses require. At the same time, many graduates face difficulties in finding job opportunities matching their qualifications.

The demand for skills in the labour market is undergoing substantial change as a result of technological progress, globalisation and population ageing. At the same time, developments such as increased labour market participation of women and greater migration flows have altered the supply of skills. In light of these changes, it is increasingly important to ensure that the skills of each country’s workforce are well matched to the skill needs of its labour market. Skills imbalances, such as shortages, surpluses and mismatch, can result in poorer labour market outcomes for individuals, weak firm performance and lower aggregate demand.

As a result of globalisation, technological change and demographic shifts, the types of skills demanded by employers have changed considerably over past decades and continued change is expected. The OECD’s Skills for Jobs indicators can help facilitate the response to changing skill needs thanks to skill imbalances information that is comparable across countries and regularly updated. This chapter takes stock of existing measures of skills imbalances and provides the rationale for the development of the OECD’s new indicators of skill mismatch and skill shortages.

This chapter describes the methods used to develop the OECD Skills for Jobs indicators. It presents the structure of the different indicators as well as the data used in the computations, the assumptions that give grounding to each index and sub-index as well as the stages involved in the creation of the complete dataset of skills imbalances across countries. The chapter also discusses the challenges that were encountered and the solutions presented in the various steps of the construction of the composite indicators of skills imbalances.

The OECD Skills for Jobs Database provides crucial information to understand better how ongoing shifts in societies and labour markets are changing the demands for different sorts of skills, knowledge and abilities. The results of the database, presented in this chapter, show that technical and technology-intensive skills are becoming increasingly more important while more traditional and less technology-intensive skills are increasingly in surplus. Consistent with the literature on labour market polarisation, the results suggest that abstract and soft skills are more in demand than routine skills, and this gap has increased over recent years. Population ageing has resulted in stronger demands for healthcare services, as evidenced by shortages in care-related skills. Increased female labour market participation and population ageing have changed the composition of the skill supply. The results also suggest that countries where the skill gap between young and older workers is bigger face stronger shortages of key information-processing skills. Finally, this chapter shows that there are big differences in mismatch between countries, but also between workers with different socio-economic and job characteristics within countries.

Skill needs data in most tables is constructed comparing countries using the latest year for which data is available for all five sub-indices. Table A.1 shows for each country the year used across the report.