Approaches to Skills Mismatch in the Labour Market: A Literature Review

Abstract

Skills mismatch in the labour market describes the fact that levels or types of skills of individuals are inadequate in view of particular job requirements. There exists no accepted unified theory of skills mismatch. The overeducation literature, inspired by several classical theoretical frameworks (human capital theory, job competition, and assignment models),attempts to define and measure the incidence of the phenomenon, but often understates the heterogeneity of both jobs and manpower. Some authors have tried to make up for this deficit by focusing on specific groups or individual abilities. By contrast, a competence approach places the observed no-causality relationship between training and occupation at the centre of its analysis, rather than considering it as a market imperfection. By doing so, it provides an alternative way of conceptualising skills mismatch, and promisingly challenges the normative assumptions and current applications of the classical frameworks.