Chapter 2. Skills use at work, skills mismatch and why they matter in Chile

Having a large pool of highly proficient workers does not guarantee that their skills are optimally used in the workplace. The extent to which skills are used at work matters for individuals and for countries and poor skills use can lead to job mismatch – the misalignment between workers’ qualifications and skills and those required by their job. This chapter describes the use of skills at work in Chile, the determinants of this use, the level of skills mismatch, and why it matters.

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Skills use at work and its determinants

The use of skills at the workplace plays an important role in the labour market outcomes of individuals in all OECD countries over and beyond that played by skills proficiency and educational attainment (as Figure 1.6 shows). Those who use their skills more intensely tend to earn higher wages, once account is taken of their individual and job characteristics. Moreover, in order for countries to grow and individuals to thrive in the labour market, skills must be put to productive use at work (OECD, 2016_[1]). The Survey of Adult Skills provides information on how frequently skills are used in the workplace.

The use of skills at work is measured by an index ranging from 1 to 5 and representing the frequency with which specific skills are used (see (OECD, 2016_[2]) for a detailed explanation of how the index is derived). A value close to 1 indicates that the person does not use that particular skill at work, while a value close to 5 suggests that the person uses the skill every day.1 On average across OECD countries and economies, the skills most frequently used at work are writing and problem solving. For both, the average-use indicator has a value close to 3.The use of reading skills at work follows close behind, while numeracy and ICT are the least frequently used, with an index value closer to two.

For Chile, the survey shows that problem solving is the skill most used in the workplace, with a value of 2.76. ICT is the least frequently used, with a value of 2.03. However, reading and writing have almost the same frequency in use, with a value of 2.47 and 2.46 respectively. Even though Chile is close to the OECD average, workers in Chile show below-average use of all skills. In practical terms, on average they perform writing, reading, and ICT related tasks less than once a month, and problem solving related tasks at least once a month but less than once a week (Figure 2.1).

It is important to acknowledge that the frequency in which a certain skill is used to perform a job does not translate directly on the level of proficiency a worker has. Proficiency is defined as the competences workers possess to conduct tasks with different levels of complexity, in regards to the items measured by the survey (OECD, 2016_[3]). When looking at the skills proficiency for Chile, then the average performance moves farther apart from OECD average, as shown in Figure 2.1.

Disaggregating skills use at work by proficiency level, as presented in Figure 2.2 shows that the frequency of skills use among Chilean adults with different proficiency levels overlap substantially. For instance, while the median use of literacy skills increases consistently as levels of proficiency increase, it is not uncommon that more proficient workers use their skills at work less frequently than less proficient workers do. This could partially reflect the limited comparability between skills proficiency as measured in the Survey and the tasks included in the skills-use indicators. However, it could also suggest that the use of skills may depend on factors other than workers’ actual skills.

The factors that influence skills use could be endogenous, given the workers individual characteristics or exogenous, given the job characteristics and working environment. Figure 2.3 shows the extent to which various factors – including individual skill proficiency, job/firm characteristics and work practices – explain the variation of skills use at work in Chile. After considering workers’ occupation and the way their work is organised, proficiency accounts for a small part of the variation in skills use at work among adults, from around 2% in problem solving and reading, to just under 5% in ICT.2 Most of the variation is explained by other factors: work practices account for up to 25% of the variation in the use of reading skills at work, while occupation accounts for up to 31% of the variation in ICT use at work. Thus, the relationship between skills proficiency and skills use is not direct but mediated by variables like workers’ occupation and work organisation.

The OECD Employment Outlook for 2016 (OECD, 2016_[2]) provides further evidence in regards to the high correlation between High Performance Work Practices (HPWP) and skills use at work. The findings are in line with a growing body of literature showing that participatory practices at work – such as those allowing workers more flexibility in determining the way and rhythm with which they carry out their tasks – encourage better use of skills in the workplace. Management practices also help, with bonuses, training and working time flexibility, all providing incentives for workers to use their skills at work more fully. High skills proficiency may set the foundation for high skills use, but it is not a necessary condition. Figure 2.4 shows that, in Chile, HPWP are used less than in the OECD on average, irrespectively of the measure used to assess this. This could relate to lower than average skills use in Chile.

Skills use at work, gender and age

The extent to which skills are used in the workplace varies across socio-demographic characteristics for several reasons. Workers may have different attitudes to the deployment of skills in the workplace, may be constrained in their choice of jobs because of personal reasons, or may be offered jobs to which HPWP are less likely to apply.

Differences between men and women are small, except for the use of problem solving at work, where they are also larger in Chile than in the OECD on average (Figure 2.5). Differences are more marked by age group. Prime-age workers tend to use all skills more frequently than either youth or older workers both in Chile and on average. However, Chile shows a different pattern than in the OECD on average when it comes to age, with lower use by older workers than by youth in all skills but reading. For some but not all skill use areas, this is due to differences in proficiency and job type across age groups: the disadvantage of older workers persists in numeracy and problem solving.

Skills mismatch in Chile

A discrepancy between skills use in the workplace and skill proficiency could signal the existence of mismatch, whereby workers are in jobs that require higher or lower skills than those they possess. While skills use and proficiency, as measured in PIAAC, cannot be directly compared, there are other ways to assess the extent to which workers are mismatched to their jobs, in terms of qualifications, field of study or skills.

A mismatch of workers’ qualifications, field of study or skills reflects a poor fit of those demanded by his or her job, having potentially significant economic implications. At the individual level, it affects job satisfaction and wages. At the firm level, it increases the rate of turnover and may reduce productivity. At the macro-economic level, it increases unemployment and reduces GDP growth through the waste of human capital and/or a reduction in productivity (Adalet McGowan and Andrews, 2015_[4]). Furthermore, rapid change in the skill needs of labour markets is putting the issue at the top of policy makers’ agendas.

Qualification mismatch arises when workers have an educational attainment that is higher or lower than what is required by their job. Qualifications reflect several different skills, including both information-processing and job-specific competences. Individuals may also face a field of study mismatch, which arises when workers are employed in a different field from the one they have specialised in. This could reflect an imbalance between the jobs available in each field and the number of graduates in that field but could also result from (the field is saturated) the difficulty workers may face in having their credentials recognised and valued across different fields (skills are not easily transferable). Finally, workers could be mismatched in a particular skill if they have higher or lower skills proficiency than that required by their job. Analysing these three forms of mismatch simultaneously offers insights into the linkages between education and the labour market, and sheds light on appropriate policy responses (Montt, 2015_[5]) (OECD, 2016_[3]).

About 34% of workers are mismatched by qualification across OECD countries/economies (Figure 2.6). This is similar to the overall 33% of qualification mismatch in Chile, with just a little over half of them being underqualified in the workplace. On the other hand, Chile has one of the highest prevalence of skills mismatch in OECD Countries, and the highest prevalence on underskilling in literacy. Around 10% of workers in Chile are less proficient in literacy than their job requires (underskilled) – the largest proportion among all participating countries/economies (the OECD average is 3.8%). Some 15.9% of workers in Chile are more proficient in literacy than required by their job (overskilled), well above OECD average of 10.8%. Field of study mismatch shows that almost one in two workers in Chile is mismatched, one of the largest values found in the group, along with England (United Kingdom), Italy, Jakarta (Indonesia), Korea and New Zealand. By comparison, across OECD countries, on average 40% of workers are employed in a field different from that in which they earned their qualifications.

Individual and job characteristics may influence the likelihood of mismatch. For example, it may take young people, as new entrants into the labour market, some time to sort themselves into well-matched jobs. Or, some workers may choose to accept a job for which they are overqualified. This can happen when workers wish to remain close to their families or better reconcile work and family life and accept part-time jobs r jobs outside their field of study. It can also happen during economic downturns when an overqualified job is preferred to unemployment.

Figure 2.7 shows the percentage point change in the likelihood of mismatch by age and gender, all else being equal. The results suggest that women, with or without family ties, are not more likely to be mismatched than men once other factors are accounted for. If anything, women are less likely to be over-qualified or over-skilled than their male counterparts and more so in Chile than in the OECD on average. In terms of age differences, older workers appear to have a lower likelihood of overqualification and overskilling while youth are more likely to be overskilled, all probabilities compared to those of prime-age men (25-44). On the other hand, both older and young workers have an increased probability of being mismatched by field of study although this could reflect different phenomena: in the case of youth it could be the result of limited opportunities in their field; in the case of older workers it could come as field of study is less relevant once experience is acquired in the labour market.

Furthermore, the results from Survey of Adult Skills show that there is significant overlap between the different dimensions of mismatch (Figure 2.8). Overqualification tends to be associated with field-of-study mismatch in Chile, where more than one in two overqualified workers are also mismatched by field of study, but well-matched by skills. This raises questions about the capacity of Chilean adults to find jobs in their field and to transfer their skills to other sectors. The skills of individuals who transition out of their field may not be recognised, and therefore workers could be forced to downgrade in order to find work (Montt, 2015_[5]).

Why mismatch matters

The use of skills in the work place and the extent to which workers are mismatched in their jobs has important implications not only for the economic output of a country, but also for outcomes at the micro level. The relevant literature finds that better skills use results in higher productivity and lower staff turnover in firms (UKCES, 2014). Some have also argued that better skills use stimulates investment, employees’ engagement, and innovation (Wrightm and Sissons, 2012_[6]).Workers who use their skills more frequently also tend to have higher wages, even after accounting for differences in educational attainment, skills proficiency and occupation. But the importance of skills use in the workplace goes beyond monetary rewards, as it has been found that more effective skills use is related to greater job satisfaction and employee well-being, with possible spill-over effects into life satisfaction and better health (e.g. (Francis et al., 2013_[7])).

The Survey of Adult Skills also shows that the use of reading skills at work correlates strongly with labour productivity (Figure 2.9). This is also the case for writing skills. One possible explanation is that using certain skills simply reflects workers’ proficiency in them. If so, the link between the use of reading skills at work and productivity could actually reflect a relationship between literacy proficiency and productivity. Yet, the frequency in which skills are used at work remains significant, even after accounting for average proficiency scores. This indicates that skills use is explaining differences in labour productivity over and above the effect of proficiency. In the case of Chile, after accounting for proficiency scores, labour productivity increases from 3.25 to 3.71 for every marginal increase in the frequency of reading at work. The strength of the link across countries/economies varies, depending on a number of factors, such as the capital stock, the quality of production technologies, and the efficiency of the match between workers and jobs.3 These additional factors influence both output per hour and human capital as captured by skills use and proficiency.

Similar to skill use, most studies conclude that, by comparing workers with similar credentials/skills but in jobs for which they are well-matched or overqualified/overskilled, mismatch has a negative impact on wages. On average, overqualified/overskilled workers appear to earn less than their well-matched peers with similar credentials or skills proficiency. Similar evidence is found by the Survey of Adult Skills, as shown by Figure 2.10. Overqualification has a stronger negative impact on hourly wages than overskilling or field-of-study mismatch, when workers are compared with their equally-qualified and equally-proficient well-matched counterparts.

On average, overqualified workers earn about 14% less than well-matched workers with the same qualifications and skills proficiency. For Chile, the wage penalty associated with overqualification is almost 18%. There is no significant effect of overskilling on wages, which goes in line with the cross country trend. And this relationship remains insignificant even when the controls for qualification mismatch are removed. After accounting for overqualification and overskilling, field-of-study mismatch entails a small wage penalty of less than 3%, on average across countries and economies, and it is slightly larger (5%) in Chile, but with no statistical significance.

Though field-of-study mismatch may not be linked to a wage penalty, this is only the case when workers are mismatched by field of study but are well-matched in terms of qualifications. As shown previously in Figure 2.8, this is not the case for Chile, as a large proportion of workers that are overqualified are also mismatched by field of study. To the extent that workers who venture outside their field need to downgrade in order to find a job, field-of-study mismatch will result in a penalty that is largely related to their overqualification.

This is not to say that having a qualification does not pay on the labour market. On average, overqualified workers earn about 4% more than well-matched workers in similar jobs. In other words, a tertiary graduate who holds a job requiring only an upper secondary qualification will earn less than if he or she were in a job requiring a tertiary qualification, but more than an upper secondary graduate in a job requiring upper secondary qualifications. However, at the aggregate level these workers would be better off if they matched in qualifications (Montt, 2015_[5]) (OECD, 2016_[3]).

References

[4] Adalet McGowan, M. and D. Andrews (2015), “Labour Market Mismatch and Labour Productivity: Evidence from PIAAC Data”, OECD Economics Department Working Papers, No. 1209, OECD Publishing, Paris, https://doi.org/10.1787/5js1pzx1r2kb-en.

[7] Francis, G. et al. (2013), Job-related Well-being in Britain: First Findings from the Skills and Employment Survey 2012, http://www.cardiff.ac.uk/__data/assets/pdf_file/0003/118659/6.-Job-related-Well-being-in-Britain-mini-report.pdf (accessed on 06 March 2018).

[5] Montt, G. (2015), “The causes and consequences of field-of-study mismatch: An analysis using PIAAC”, OECD Social, Employment and Migration Working Papers, No. 167, OECD Publishing, Paris, https://doi.org/10.1787/5jrxm4dhv9r2-en.

[8] OECD (2014), OECD Employment Outlook 2014, OECD Publishing, Paris, https://doi.org/10.1787/empl_outlook-2014-en.

[1] OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills, OECD Skills Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264258051-en.

[2] OECD (2016), OECD Employment Outlook 2016, OECD Publishing, Paris, https://doi.org/10.1787/empl_outlook-2016-en.

[3] OECD (2016), Getting Skills Right: Assessing and Anticipating Changing Skill Needs, Getting Skills Right, OECD Publishing, Paris, https://doi.org/10.1787/9789264252073-en.

[6] Wrightm, J. and P. Sissons (2012), The Skills Dilemma – Skills Under-Utilisation and Low Wage Work – A Bottom Ten Million Research Paper, The Work Foundation, Lancaster University,.

Notes

← 1. A value of 1 indicates that the skills related task is never carried out; a value of 2 indicates that it is carried out less than once a month; a value of 3 indicates that it is carried less than once a week but at least once a month; a value of 4 indicates that it is carried out at least once a week but not every day; and a value of 5 indicates that it is carried out every day.

← 2. The variance analysis presented here uses Fields (2004) regression-based decomposition technique. This approach is only one way of comparing the importance of a factor as a correlate of skill use. An alternative would be to use regression analysis. The advantage of the variance decomposition approach is that it allows for a comparison of factors that are measured on different scales. See also (OECD, 2014_[7]), Chapter 5.

← 3. It is possible that the link between skills use at work and productivity may reflect the association between reading (or writing or problem solving) use and the use of other skills, or the link between use and the nature of the work environment (e.g. capital intensity).