Measuring the Incidence and Impacts of Skill Gaps Among European Workers

In this paper, we examine the incidence of skill gaps among European employees. We identify the worker and firm level characteristics most commonly associated with skill gaps and investigate the extent to which this particular form of skill mismatch is associated with wage penalties. In 2021, we find that 16.2% of EU employees had essential and non-essential general skill gaps. The incidences for competency specific skill gaps were 29.5% for numeracy skills, 39.7% for technical skills and 49.4% for social skills. Among employees we find that general skill gaps were highly correlated with numeracy, social and technical skills gaps. The more complex the job, the higher the probability for workers to report having a general skill gap or a domain specific skill gap. We find no evidence that skill gaps are associated with negative productivity impacts (proxied by wages). We find that, where skill gaps exist, they are likely to be driven by workers motivated to keep pace with evolving requirements in more complex jobs. This is very different from the usual view of skill gaps as being concentrated among poorly educated workers in low value-added employment lacking essential skills.