Identifying literacy and numeracy skill mismatch in OECD countries using the job analysis method

Skill mismatches have strong negative effects on productivity, job satisfaction, and other outcomes. To reduce skill mismatches, governments need to rely on accurate data on the prevalence of these mismatches. The Programme of the International Assessment of Adult Competences (PIAAC) is currently the most important data source providing excellent and unparalleled information for many countries on two key information-processing skills (i.e., literacy and numeracy skills). However, although these data contain rich information about possessed skills, countries lack directly comparable information on the required skills in those domains. Hence, it has been difficult to use the PIAAC data to identify skill mismatches, other than through proxies of required skills (e.g., the average skill level in occupations) or workers’ self-assessments of skill mismatch. In this paper, we use the Job Analysis Method (JAM) to determine the required skill levels of literacy and numeracy for all 4-digit ISCO08 unit groups of occupations in the same metric and scale as was used in PIAAC. JAM involves the use of occupational experts to rate the skill requirements in the different occupations. JAM has never been used before to identify required skill levels for literacy and numeracy as measured in PIAAC, and the paper thus presents the first results on the prevalence of skill shortages and skill surpluses in these key information-processing skills across different OECD countries and across different occupations and sectors that is based on a more direct estimate of the required skills. We provide estimates for the proportions of well-matched, overskilled and underskilled workers per country, and compare these with estimates based on alternative methods for estimating skill mismatch. We also compare JAM with these other methods in explaining wage differentials, as well as job satisfaction. We conclude that there are large differences in the estimates of the prevalence of skill mismatches depending on the method used. We show several advantages using JAM and discuss some of the limitations as well.