Study on the Measurement of Skill Deprivation and Labour Market Mismatch

With an ageing issue arising as a policy priority across OECD countries, decline in productivity among aged population has drawn much attention among policy makers. Adding on current literature on skill depreciation, this study develops an empirical measure of skills depreciation, estimates depreciation rate of education, and compares depreciation rates across OECD countries. Using PIAAC data on skills proficiency over population, this study derives measures for skills depreciation since the completion of formal education. Results show that the depreciation rate of education is under 1% per a year across countries. Which means, its causing skill depreciation rate much smaller than 1%. Like previous longitudinal studies which do not report clear age-related decline of cognitive skills until 60’s and 70’s, the estimates don’t show huge depreciation. Among OECD countries, Korea shows the highest cognitive skill depreciation rate same as depreciation rate of education. Intellectual challenge at the workplace is of high significance as causes of skill depreciation. These findings suggest that skill use prevents depreciation from occurring, shedding light on the importance of making workplace more skills friendly as well as participation in learning activities. This study also measures the labor market mismatch focused on a qualification mismatch. Compared to the OECD countries, Korea’s over-education and over-skill is more serious than under-education and under-skill. Because the cognitive skill of Korea is lower than OECD average, skill problems in Korea may be caused by a demand side. Over-education mismatch is related to a low intellectual challenge at the workplace. Which means, labor market mismatch can affect a skill depreciation. So, over-education is not only the problem of youth unemployment, but also of middle-aged or elderly people’ skill depreciation