Labour market impact of skill mis-match

TL; DR

employment income of those who work full time full year: Going from relatively well matched to relatively poorly matched causes a -7.9% reduction in employment income for those working full time, full year.
the probability of working full time full year: Going from relatively well matched to relatively poorly matched causes a -5.4% reduction in the probability of being employed full time full year.

What is skill mis-match?

When the skills of a worker do not match the skills of their occupation.
Workers vary in terms of how well matched their skills are to the skill required by their occupation.
There are various reasons why people might be mis-matched… such as?
Given we are using observational (census) data we will want to control for these confounds.

How do we measure skill mis-match?

Skill mis-match is the euclidean distance between the skill profile of an occupation and the skills possessed by a worker.
Occupation skill profiles easy to obtain from ONET skills and work activities.
Skills possessed by workers? We are going to have to get creative.

Field of study skill profile:

We presume that a worker’s skill profile is determined by their field of study.

Example: Health and related fields

Source: Statistics Canada 98-10-0403-01

Skill profile of Health and related fields:

So in the previous table we derived weights \(\omega_n\) associated with the \(n\) occupations that account for more than one percent of the workers in a given field of study.
For a given skill \(S\) and field of study \(FOS\) we calculated the weighted mean of the skill score:

\[S_{FOS}=\sum^{n}_{NOC=1} \omega_n S_{NOC}\]

Skill mis-match:

Where do fields of study lead?

The Income Regression:

\[\begin{multline} \log(Employment~Income)=Age+Highest~Degree+ \\ Language+ Gender+ Ethnicity+Occupation \\ +Field~of~Study+distance+\mu \end{multline}\]

Plot of regression results:

What if a social planner could reallocate workers between occupations?

Above we identified how much employment income would be expected to increase for an individual who went from being relatively well matched to relatively poorly matched.
Re social welfare, it is possible that increasing the match quality of a given individual may worsen the match quality of whoever they displaced when they shifted occupations.

Simulation of improved matching:

Distributional effect of swapping:

Second order stochastic dominance (SOSD):

Skill mis-match and full time full year employment:

\[\begin{multline} logit(Employed~FT~FY)=Age+Highest~Degree \\+ Language+ Gender+ Ethnicity+Occupation+\\Field~of~Study+distance+\mu \end{multline}\]

Regression results:

Full paper here:

https://rpubs.com/BC_LMIO/1136692