Structural Unemployment in Croatia How Important is the Occupational Mismatch?

1. Structural Unemployment in CroatiaHow Important is the Occupational Mismatch? Iva Tomić The Institute of Economics, Zagreb & Faculty of Economics, University ofLjubljana • These 9 occupations are grouped into 2 main categories: • white-collar occupations (1-4): • highly-skilled white-collar occupations (1-2); • skilled white-collar occupations (3-4); • blue-collar occupations (5-9) • semi-skilled blue-collar occupations (5-7); • lower-skilled blue-collar occupations (8-9); • Occupational imbalance (mismatch) is measured relative to the existing aggregate levels of unemployment and vacancies in the economy; • occupations represents separate submarkets in the overall labour market. • Background • In order to completely utilize the stock of human capital in the population it is essential to match individuals’ education-specific skills with the occupational job characteristics(Nordin et al., 2010). • Both the efficiency of the matching process and mismatch may be important determinants of the level of unemploymentin the economy(Dur, 1999). • Labourmarket mismatch (structural imbalance): • inadequate education and training or • insufficient geographical andoccupationallabour mobility. • In (most) transition countries: • mismatch is the result of significant changes during the 1990ies in the structure of product markets, which have led to changes in the structure of labour demand(Obadić, 2004); • low mobilityacross different occupations, industries and locations(Boeri, 2000); • skill shortages as a key impediment to faster labour reallocation and convergence to the EU-15 employment structures(Brixiova et al., 2009). • Methodology • Besides the aggregate function, the study estimates the disaggregated matching functions based on the grouping of (similar) occupations; • Matching functions explicitly incorporate mismatchindex (based on Dur, 1999) for different submarkets (occupations). • the importance of mismatch on the level of U depends on the distribution of both U and V over submarkets (occupations), but also on the size of the particular submarket. • Aim • To what extent can the existing level of unemployment (jn Croatia) be attributed to structural (occupational) mismatch or by how much would unemployment fall were structural balance to be achieved? • Summaryoftheresults • the impact of occupational mismatch on the matching process is insignificanton the aggregate level; • however, it affects (negatively) the matching process when labour market is examined through its submarkets; • share of the unemployment benefits users in total unemployment has negative impact on the matching process, while time trendaffects it positively; • in most of the cases the hypothesis of CRS cannot be rejected. • the portion of total unemployment that can be attributed to occupational mismatch is estimated to be only up to 6%, which evidently cannot explain high and persistent unemployment in Croatia; • in different submarketsthisfraction is even smaller (except for the white-collars). • Data • Monthly data from CES in the period from January 2004 until December 2011: • the number of registered unemployed persons (U), • the number of reported vacancies (V), and • the number of employed persons from the Service registry (M). • To be able to detect the existence of mismatch in the labour market, all variables are divided according to the 9 broad occupational groups: • Legislators, senior officials and managers; • Professionals; • Technicians and associate professionals; • Clerks; • Service and shop and market sales workers; • Skilled agricultural and fishery workers; • Craft and related trades workers; • Plant and machine operators and assemblers; • Elementary occupations. Results Contact The Institute of Economics, ZagrebTrg J. F. Kennedyja 710000 Zagreb, Croatia Ph: +385-1-2362-244Email: itomic@eizg.hrWeb: http://www.eizg.hr 24th annual EALE Conference, Bonn – Germany, September 20-22, 2012