Using occupational structure to measure employability with an application to the Brazilian labor market

We propose measuring individual employability as a weighted average across occupations of a worker’s predicted wage for each occupation. Weights are given by the individual occupational probability distribution. Under this measure, a worker is more employable than another if she has a greater chance to obtain a better paid occupation. After normalization, expected employability corresponds to the population correlation between occupational predicted wages and the chance to obtain employment in these occupations and serves as a measure of the allocative efficiency of labor market. We apply the methodology to Brazil and found that employability increased and became less unequally distributed from 2002 to 2011. We used a decomposition method to investigate the causes of these changes. Although average normalized employability is weakly positive, it has increased for the period, which suggests that there is room for efficiency gains in the allocation of workers to occupations in the Brazilian labor market.