Upgrading in the European Union

Human capital factor endowments have become one of the main determinants of international competitiveness. Both to catch up in the technological race and to increase the long-term flexibility of the workforce, industrialized countries require a highly skilled labour force. This paper analyzes the skills upgrading process in the European Union, as reflected in shifts in the occupational structure of employment and changes in the skill requirements in the various occupational fields. We distinguish between upgrading by recruitment policies and by training policies. Labour Force Survey data shows an increase in skill levels and rather stable participation in continuing vocational education. The data also reveal diverging trends, in the period 1983- 1991, between the various Member States of the European Union, both with regard to the skill level of the working population and the rate of participation in training activities. Estimation results show that, in general, intermediate skilled workers participate more in training activities than highly skilled workers. This suggests some substitutability between initial education (i.e. recruitment policies) and continuing training. However, if we correct for the occupational field in which workers are employed, recruitment policies and training policies appear to be complementary rather than substitutes. This means that within the various occupational fields, continuing training increases the skill gap between highly skilled and intermediately skilled workers. Moreover, both intermediate and highly skilled workers participate significantly more in continuing training than low skilled workers. This again indicates an increase in the skill gap in the labour force in the EU Member States, which means that continuing training fails to achieve the upgrading of low skilled workers which is required if the labour supply is to be adjusted to transfer human resources towards activities which match the EU''s comparative advantages.education, training and the labour market;