Skill Mismatch and Training in Australia: Some Implications for Policy

The link between skill acquisition and earnings is one of the cornerstones of labour economics. The conventional view is that, all else being equal, workers with relatively higher stocks of embedded skills will receive a relatively higher return when supplying labour. The link between skills and labour market returns means that the extent of skill acquisition, and the means by which those skills are acquired, may have important implications for labour market outcomes. Indeed, the fact that education and more broadly human capital are associated with higher earnings is a familiar research result. However, recent research has emphasised the idea that the distribution of skill acquisition across the pool of available workers may not be perfectly aligned with the distribution of tasks or technologies across the economy; this research has given prominence to the concept of job-skill mismatch. The basic problem is that workers may be either overskilled or under-skilled for the labour market tasks they are called upon to perform.