Policy Brief n.38 - Skill Overkill: The EU Needs More Than Just More Training
While economic theory and empirical evidence on human capital affirm the positive effects of education and training on productivity and economic growth, there is a tendency to treat skills enhancement as a universal remedy for labor market inefficiencies. A Policy Brief by Pietro Galeone
-
FilePB38_Skill Overkill.pdf (490.55 KB)
Executive Summary
The European Commission’s recently launched Union of Skills initiative aims to enhance the quality of education and training across the EU by fostering lifelong learning, facilitating the mobility of workers, and attracting and retaining talent.
This ambitious effort builds upon a long history of European skills development policies, but it begs the question: what will be different from previous initiatives?
While economic theory and empirical evidence on human capital affirm the positive effects of education and training on productivity and economic growth, there is a tendency to treat skills enhancement as a universal remedy for labor market inefficiencies. Investment on skills is necessary, so the EU’s focus on it is commendable; but it is a mistake to consider it a sufficient policy.
This policy brief critically examines some challenges of a skills-only approach, highlighting the risks of a labor supply-driven approach to skills provision and advocating for a more complete strategy that includes demand-side interventions and the matching process.
A closer look reveals three key risks associated with a skills-first approach:
Overqualification and Skill Wastage – Data shows that EU countries with a lower share of tertiary graduates tend to experience higher overqualification rates, suggesting that only working on the supply of skilled workers does not automatically translate into better job opportunities.
If the demand for high-skilled labor is not sufficiently robust, many workers end up in positions that do not match their qualifications, leading to inefficient use of resources.
Prolonged Unemployment Among Skilled Workers – When workers acquire new skills but cannot find jobs that match their qualifications, they may remain unemployed for longer periods in search of appropriate opportunities.
And in fact, where overqualification rates are higher, unemployment rates for tertiary graduates are higher.
Brain Drain and Labor Mobility Challenges – In the absence of adequate domestic opportunities, highly skilled workers may choose to migrate to countries where their qualifications are more valued.
Evidence shows a correlation between high unemployment rates among tertiary graduates and increased emigration of young professionals across EU countries, raising concerns about long-term economic sustainability in skill-exporting countries.
This evidence points to a less talked-about mismatch, which weakens the intended economic benefits of upskilling initiatives and calls for policies that stimulate job creation and occupational quality in high-value and high-skill sectors.
To maximize the effectiveness of the Union of Skills, policymakers must go beyond supply-side measures and focus on strategies that enhance the demand for skilled labor as well as give firms and employers a much more active role in the provision of the skills they need.
Social partners, including employers’ organizations, must be actively involved in shaping skills programs to ensure their relevance to industry needs. Employer-led apprenticeships, on-the-job training initiatives, and academic-industry collaborations can enhance the utility of skills investments.
In doing so, however, policymakers must also guarantee the quality of hybrid learning instruments available. Internships, apprenticeships, and other hybrid work-learning arrangements must be protected from exploitation to ensure meaningful skill acquisition.
Improved data collection and skills tracking are also needed to be able to perform better analysis on skills and on labor market matching. More granular data on overqualification, employment trajectories, and migration patterns is needed to refine policy interventions and ensure skills programs align with labor market needs.
While investment in skills is crucial for economic development, it alone does not serve as a panacea for all labor market challenges. A more holistic approach is essential: one that pairs skills development with policies aimed at stimulating demand, improving job quality, and fostering inclusive economic growth.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
