Skills mismatches : an impediment to the competitiveness of EU businesses

Skills mismatches are widely accepted as a factor that drags down on potential economic growth and as such require concrete policy measures both at the EU and national level. This report was prepared by the Institute for Market Economics (IME) and is dedicated to the study of skills mismatches in the EU and their effect on the competitiveness of EU businesses. It includes a comprehensive review of existing literature on the issue and outlines some of the main conclusions regarding the relation of skill mismatches to education, personal and aggregate productivity, labour market dynamics and outcomes, innovation capacity and competitiveness. The study also includes the results of a dedicated survey designed to shed further light on the causes and effects of skills mismatches from the point of view of companies. We provide further evidence of the importance of Mismatch Priority Occupations (as identified by Cedefop), as well as additional insight into potential labour market bottleneck is five reference countries (Austria, Bulgaria, Finland, Germany and Spain). Current and long-term demographic trends make skills mismatches an issue of particular acuteness - against a projected decline in the labour force and an increase in the average age, European economies cannot afford to waste human capital. We find that efforts in achieving effective VET, lifelong learning and labour intermediation practices have to be supported by general competitivenessenhancing reforms in EU economies. We estimate an EU-wide annual productivity loss of 2.14% due to existing mismatches.