Structural change in labour demand and skills mismatches in the euro area

Skills mismatches, i.e. discrepancies between the skills that employers are looking for and the skills that the workforce have, remain high in many Member States. This may be temporary, due to labour market friction and the business cycle, or more persistent, due to structural imbalances between the supply and demand of skills.At the same time, technological change (along with globalisation and demographic change) is having a structural impact on the demand (and on the supply) of skills, which may exacerbate the skills-to-job mismatch. In terms of demand, the structure of employment is largely shifting from routine to non-routine occupations in the euro area as a whole. Only a few studies have so far tried to assess the link between the change in the task content of jobs and skills mismatches. This section investigates this link. The analysis suggests that new technologies that reduce the demand for workers performing routine tasks have increased skills mismatches. This is consistent with the phenomenon of technological change driving permanent shifts in the demand for labour, which lead to imbalances between supply and demand. The increasing demand for highly skilled tasks along with the decline in demand for routine tasks have increased skill mismatches in the euro area. Although this may be partly offset by improvements in economic conditions, unless there is a suitable policy response, the labour market trends are set to result in higher skill mismatches, in particular during a downturn in the economy. In this regard, the Recovery and Resilience Facility as well as the revised Skills Agenda provide Member States key tools to facilitate the adaptation of education and training systems to support digital skills as well as to foster educational and vocational training for all ages.