Scholarly article on topic 'Labour Market and Educational Mismatches in Romania'

Labour Market and Educational Mismatches in Romania Academic research paper on "Economics and business"

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Abstract of research paper on Economics and business, author of scientific article — Gina Cristina Dimian

Abstract The objective of this paper is to study Romanian employees’ perceptions on the relationship between education system performance and labour market requirements. The research was focused on the analysis of the labour market in Romania in terms of the skills required by the current job. The questions were aimed at studying three main aspects related to the current jobs of Romanian employees: general characteristics (length of service, source of information about current job, the degree of satisfaction related to different aspects of it), mismatches between the level or type of education and job requirements (time to become effective, how they acquired knowledge and skills held, the contribution of education and training to improve performance in current job, over-qualification versus under-qualification, over-education versus under-education), situation in terms of skills held and those required by the workplace (skill obsolescence, skill shortages, skill gap). The results show that even in a crisis period when unemployment is at high values, employers have difficulties in finding appropriate qualifications for some jobs, or the right candidate for the vacancies. Even current employees lack some important abilities or skills such as: motivation, loyalty or responsibility.

Academic research paper on topic "Labour Market and Educational Mismatches in Romania"

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Procedia Economics and Finance 10 (2014) 294 - 303

7th International Conference on Applied Statistics

Labour Market and Educational Mismatches in Romania

Gina Cristina DIMIANa*

aBucharest University of Economics Studies, Romana Square, no. 6, 1st district, Bucharest, postal code: 010374, Romania

Abstract

The objective of this paper is to study Romanian employees' perceptions on the relationship between education system performance and labour market requirements. The research was focused on the analysis of the labour market in Romania in terms of the skills required by the current job. The questions were aimed at studying three main aspects related to the current jobs of Romanian employees: general characteristics (length of service, source of information about current job, the degree of satisfaction related to different aspects of it), mismatches between the level or type of education and job requirements (time to become effective, how they acquired knowledge and skills held, the contribution of education and training to improve performance in current job, over-qualification versus under-qualification, over-education versus under-education), situation in terms of skills held and those required by the workplace (skill obsolescence, skill shortages, skill gap). The results show that even in a crisis period when unemployment is at high values, employers have difficulties in finding appropriate qualifications for some jobs, or the right candidate for the vacancies. Even current employees lack some important abilities or skills such as: motivation, loyalty or responsibility.

© 2014 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/3.0/).

Selection and peer-review underresponsibilityofthe DepartmentofStatisticsandEconometrics,Bucharest Universityof Economic Studies.

Keywords: labour market; competences; skills; educational mismatches; statistical research

* Corresponding author. Tel.: +4.021.319.19.01; Fax: +4.021.319.18.99. E-mail address: ginadimian@gmail.com.

2212-5671 © 2014 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/3.0/).

Selection and peer-review under responsibility of the Department of Statistics and Econometrics, Bucharest University of Economic Studies. doi: 10.1016/S2212-5671(14)00305-0

1. Introduction

The financial crisis triggered a few years ago and the recession that followed have had an impact on the whole economic and social system of the EU countries and beyond. Its fundamental principles have been put to the test.

Thus, sustainable development is one of the fundamental objectives of the European Union established by the constituting treaty. In 2010, with the launch of the Europe 2020 strategy the priority to ensure sustainable growth was reiterated. This became one of the three fundamental objectives of the European Union for the next decade, with smart and inclusive growth. In response to the financial crisis and the challenges of globalization, pressure on resources and the growing aging population, the European Commission has set a series of targets to be reached in order to achieve economic growth.

Of these, three aimed at better use of human resources (especially labour, through education, employment and skills) and protecting it against the risk of poverty.

Currently, these targets appear increasingly unlikely to be met given the recent changes of the labour markets: jobs destructions by restricting the activities of companies, rising unemployment (in some European Union countries at historic highs in particularly youth and long term unemployment), increasing vulnerable employment and poverty. All these changes have major repercussions on the quality of life of citizens.

"Quality of life requires that people's basic and social needs are met and that they have the autonomy to choose to enjoy life, to flourish and to participate as citizens in a society with high levels of civic integration, social connectivity, trust and other integrative norms including at least fairness and equity, all within a physically and socially sustainable global environment" (Phillips, 2006).

A category of people affected by the consequences of the economic recession is the young. Youth unemployment is increasing because firms prefer employing already qualified and experienced workers. In this context, particular importance should be given to the relationship between education and labour market requirements so that imbalances such as over-qualified, under-qualified, over-education and under-education, skill obsolescence, skill shortage, skill gap should be avoided.

The objective of this paper is to study employees' perceptions on the relationship between the performance of Romanian education system and labour market requirements. The research was focused on the analysis of the labour market in Romania in terms of the skills required by the current job.

2. Main aim and research questions

This paper proposes a quantitative research on workforce perceptions regarding the relationship between the performance of the education system and labour market requirements with the main aim to statistically analyse the existence of certain types of imbalances / disparities in the Romanian labour market: skill shortage and qualification mismatch.

Starting from the list of questions proposed by CEDEFOP (2010) to be addressed to employers, the main research topics include:

1. general characteristics: length of service, source of information about current job, the degree of satisfaction with different aspects of it.

2. mismatches between the level or type of education and job requirements: time to become effective, how they acquired knowledge and skills held, the contribution of education and training to improve performance in current job, over-qualification versus under-qualification, over-education versus under-education.

3. situation in terms of skills held and those required by the workplace: skill obsolescence, skill shortages, skill gap.

The questionnaire was applied on 200 employees with the following features have been surveyed:

- Average age: 41 years;

- Age at first job: 21 years;

- 56% women and 44% men;

- 3% with secondary education level, 32.5% high school, 50% tertiary education and postgraduate level 14.5%;

- 1.5% with wages less than 500 RON, 26.5% with wages between 501 and 1000 RON, 28% between 1001 and 1500 RON, 24% between 1501 and 2000 RON, 20% with wages over 2000 RON.

- 13.5% employed in micro-enterprises, 19.5% in small enterprises, 20% in medium enterprises, 20% in large enterprises and 27% in large enterprises.

- 89% of fixed-term employment contract and 11% indefinitely.

- 2.5% employed in Agriculture, forestry and fishing, 14% in Mining, quarrying and manufacturing, 3% Electricity and gas, 7% in Constructions, 26.5% in Hotels and restaurants, transport, storage and communication, 11.5 % in Financial intermediation, real estate, renting and business activities, 35.5% Other public and private services (education, health and social assistance, etc.).

3. Results and discussion

Given that a large part of the employees (28.5%) have been employed for over 15 years, it is understandable why the main source of information about the current job was the employer (65.93%) (Fig. 1). In fact, many of the employees remained at the initial workplace which was usually obtained by government placement.

< 1year 1-4 years 5-9 years 10-14 yearsi > 15 years

Fig. 1. Labour market experience

Those employed for less than one year at current workplace have used as main source of information the Internet. Other sources reported by respondents outside predefined responses have been: repartitions, other employee and acquaintances (Fig. 2).

Fig. 2. Main source of information about the current job

The lowest percentage of responses was recorded for employment agencies. A very small number of employees consult their ads. The vast majority prefer to get information directly from the employer.

Most respondents (41.5%) believe that to become fully effective an employee needs 6 months to work (Fig. 3). It

should be noted that the opinions of employers are very close to those of employers. This means that, in order to have performance, an employer must be willing to invest time and implicitly money in training his employees. This is true especially for young workers and may be one of the explanations for the high unemployment among young people in the current crisis when employers prefer hiring workers already experienced.

Fig. 3. Time needed to become fully effective

Also, 68% say they have obtained the qualifications and skills they have in an institutionalized system of education or training and 60% that education and training activities and have contributed greatly to improving performance at the current workplace (Fig. 4).

Fig. 4. Contribution of education and training activities to improve performance in employee's current job

Regarding satisfaction related to important aspects of the current job, on the first places employees have rated: the type of activity, working time, job security and the relationship with the employer. As expected, the least satisfactory aspect concerns the possibility of promotion (58.5%) and net earnings (54%) (Fig. 5).

Fig. 5. Degree of satisfaction of the employees

As regards the compatibility between the qualifications and skills held and those required by jobs, only 16% said / believes that they need training activities to perform well their duties, while 44% consider they have the skills and abilities to perform tasks more complex than the current ones. Of the latter 59% are dissatisfied by their income.

Table 1. Measurement of vertical mismatches (Correlations)

Educational level suitable for the job_Educational level

Kendall's tau_b Educational level suitable for the job 1.000 .695(**)

Educational level .695(**) 1.000

Spearman's rho Educational level suitable for the job 1.000 727(**)

Educational level 727(**) 1.000

** Correlation is significant at the 0.01 level (2-tailed). Number of observations N=200

In order to analyse vertical mismatches, two methods have been employed. The first has been correlation analysis between the educational level held by the employee and the educational level suitable for the job. Kendall and Spearman correlation coefficients have a value of approximately 0.70, which means a link of medium intensity (Table 1).

Thus, some employees have accepted a job requiring a level of education below that they held. Explanations for this situation are multiple: young employees accept such jobs to gain experience needed for a job that matches their level of education and better paid. Older employees accept such a job because the qualification they hold is no longer required on the labour market. Sometimes, however, people looking for a job deliberately accept a job requiring a level of education below the level held because the wages are higher in this case.

Gina Cristina Dimian / Procedia Economics and Finance 10 (2014) 294 - 303 Table 2. Types of employees considering themselves incompatible with the job requirements (% of Total)

Do you think that you have the TT .. , ..

_,,.,, j ji .en . Have you achieved the skills and qualifications _ . .

qualifications and skills needed to fill jobs Total

required by the current job in a school system or which involve more complex tasks than the n J

specialized training?

current ones?

Yes No

Yes Ovei^uahfied mismatched 83.5

60'0 23.5

No „ , , , Skills

Matched . . , , , _,

mismatched 16.5

8 0 8.5

Total 68.0 32.0 100.0

The second method involved combining responses to two questions (Budria, 2010): "Do you think that you have the qualifications and skills needed to fill jobs which involve more complex tasks than the current ones?" and "Have you achieved the skills and qualifications required by the current job in a school system or specialized training?".

The vast majority of the respondents (83.5%) believe that they have qualifications that allow them to perform more complex tasks than the current ones. From them, 60% have obtained their skills and qualifications in a school system or specialized training. In fact, only 8% of the respondents that have achieved their skills and qualification in the school system or specialized training can be considered matched with the requirements of the current job, while 8.5% are strongly mismatched.

Even if such a result was expected given that employees' responses are highly subjective, though the correlation with other characteristics of respondents may reveal some general features of the situation of Romanian employees at work. Thus, the highest coefficient of correlation between the response to the question regarding the ability to perform more complex activities and employees' characteristics has registered for the level of education and type of activity: 0.278, 0.101 respectively. Those who consider themselves to have qualifications and skills to carry out more complex activities are mostly postgraduate and working in the field of public or private services. They are also those most dissatisfied with aspects related to earnings and promotion opportunity.

I need training acMes to fulfil very well job tasks

■ False □ True

My qualifications and skills enable me to fulfil very well job tasks

■ False □ True

Fig. 6. Analysis of vertical mismatches

My qualifications and skills enable me to fulfil more complex job tasks

□ True

A similar situation is revealed by the answers to three other statements such as: 1. I need training activities to fulfil very well job tasks.

2. My qualifications and skills enable me to fulfil very well job tasks.

3. My qualifications and skills enable me to fulfil more complex job tasks.

Approximately 60% of employees believe that their qualifications and skills enable them to fulfil very well job tasks, but also they are capable to do more demanding tasks. Only 16% of the respondents feel that they need training activities to perform at their workplace and from them the large majority are the young (Fig. 6).

Are there certain skills that you had in the past and are now no longer required by the current job?

□ Yes

Fig. 7. Skill obsolescence

Almost a quarter of the respondents admitted that certain previously acquired skills are no longer required by the current job. These include: technical skills (27%), language skills, decision-making, productive, administration, dynamism and time management, experience in management, design, development, leadership, specialized skills (typist, carpenter, electrician, machined, paint and varnish specialist, mason, draftsman) (Fig. 7).

Some employees are now working in a field completely different from that for which they trained.

Are there new skills required by your current job and you do not possess? ■ No □ Yes

Fig. 8. Skill gap analysis

As regards the skills required by the current job and they do not possess, only 13.5% recognised that they exist. Among these, the most frequently encountered are: computing (24%), foreign languages (10%), audit, negotiation, research, teamwork, mentoring (Fig. 8).

Table 3. Reasons for skill gap

Skill gap

Lack of

necessary

skills

Change ofjob

requirements

Lack of

training

programs

Lack of

correct

information

from the

employer/lack

predictability

Total disagreement

Disagreement

Indifferent

Agreement

2.5 1.5

Total agreement

19 11.5

The main reasons for the occurrence of these deficiencies are considered: lack the necessary skills and lack of correct information from the employer/lack of predictability (Table 3). These statements are supported by relatively small percentage of those involved in training in the past 12 months (34%) (Fig. 9).

Have been involved in training programs organized by your employer in the last 12 months?

■ No □ Yes

Fig. 9. Employees involved in training programs

4. Model

The analysis of employees' perceptions regarding the correlation between their qualifications and skills and those required by the jobs bring useful information about a number of mismatches occurring in the labour market due to lack of correct information between participating actors.

In addition, the level of the salary at a time is a good indicator of the demand for skills. The study "Skills, Not Just Diplomas. Managing Education for Results in Eastern Europe and Central Asia "(Sondergaard and Murtha, 2012) highlights the fact that the returns to education have increased in all countries of Eastern Europe and Central Asia, particularly for occupations involving scientific, intellectual and managerial skills.

Thus, in 2003, in Romania's case, the gain of an additional year of education was, according to the above mentioned study, 4.2%, among the lowest of all countries surveyed. On top stood Hungary and Poland, with percentages similar to those in developed economies of 11.1 and 10.6, respectively.

Using the same mincerian equation and data from the 200 employees surveyed, the return to education is now

6.6%, 2.3 percentage points higher than in 2003, but still quite low compared to what Hungary and Poland recorded in the early 2000s.

Table 4. Regression analysis results

Dependent Variable: LNWAGE

Method: Least Squares

Sample: 1 200

Included observations: 200

Variable Coefficient Std. Error t-Statistic Prob.

C 5.665 0.194 29.186 0.000

YEARS STUDIES 0.066 0.011 5.884 0.000

LABOUR MARKET

EXPERIENCE 0.026 0.010 2.486 0.014

LABOUR MARKET

EXPERIENCE A2 -0.001 0.001 -1.891 0.060

GENDER 0.152 0.057 2.652 0.009

INDUSTRY -0.009 0.016 -0.555 0.580

TYPE_CONTRACT 0.310 0.096 3.235 0.001

R-squared 0.266

Adjusted R-squared 0.244

F-statistic 11.682

Prob(F-statistic) 0.000

LNWAGE = 5.665 + 0.0658* YEARS_STUDIES + 0.026* LABOUR MARKET EXPERIENCE - 0.001* LABOUR MARKET EXPERIENCE A2 + 0.152*GENDER - 0.009*INDUSTRY + 0.310*TYPE_C0NTRACT

As expected, other features included in the regression analysis, in addition to years of study and work experience were found to have a significant impact on wages (net income), except for the type of activity. Thus, males have higher earnings than females, as happens in the case of fixed-term employment contract. In terms of type of activity, there are no significant differences between those employed in different industries. The sign of the coefficient in this case can mean that occupations in the public service are among the most poorly paid.

5. Conclusions

The objective of this study was to examine employees' perceptions about the relationship between the performance of the education system and labour market requirements. The research was focused on studying general aspects of Romanian employees' workplaces, the differences existing between job requirements and the level and type of education of employees, i.e. the degree of adaptation of their abilities to the job market's needs.

Processing the responses to the questionnaire applied led to the following conclusions:

- The necessary period of time for an employee to become fully efficient at work is at least 6 months;

- The issues which employees are most unsatisfied in their current job are the salary / net income and the possibility of promoting;

- Regarding the compliance existing between the level of education held by workers and that requested by the workplace, most employees appreciate that they are over-qualified (are able to carry out activities / tasks more complex than the current ones);

- Only a minority of respondents (13.5%) admitted that there are certain skills that the actual workplace requires

and they do not posed. These include: computer skills and foreign languages;

- The main causes for the occurrence of these deficiencies are considered the initial lack of necessary qualifications, actually inaccurate information from the employer - which leads to a lack of predictability. This fact has to be also considered taking account that only about a third of the questioned employees were involved in training programs in the last 12 months.

Processing the responses of the 200 surveyed employees by the regression analysis has allowed calculating the gain of an additional year of education, which represents an important indicator of the demand for qualifications on the Romanian labour market. Although this percentage is 6.6% higher than that calculated for 2003 in "Skills, Not Just Diplomas. Managing Education for Results in Eastern Europe and Central Asia "(Sondergaard and Murtha, 2012), the difference compared to advanced countries remains significant. The labour market in Romania is in the process of transition to employment based on superior qualifications, but it currently is at a quite low level.

In this respect, the results represent an argument for greater investment in workforce education in Romania, but also to strengthen relations between education and business.

Acknowledgements

This work was cofinanced from the European Social Fund through Sectoral Operational Programme Human Resources Development 2007-2013, project number POSDRU/89/1.5/S/59184 „Performance and excellence in postdoctoral research in Romanian economics science domain".

References

Budria, S., 2010. Are Educational Mismatches Responsible for the 'Inequality Increasing Effect' of Education?, MPRA Paper No. 23420, online

at http://mpra.ub.uni-muenchen.de/23420/. CEDEFOP and ILO: Skills for green jobs, European synthesis report, Luxembourg: Publications Office of the European Union, 2010. CEDEFOP: The skill matching challenge. Analysing skill mismatch and policy implications, Luxembourg: Publications Office of the European Union, 2010.

COM: Europe 2020, A strategy for smart, sustainable and inclusive growth, Brussels, 3.3.2010.

COM: New Skills for New Jobs: Action now, A report by the Expert Group on New Skills for New Jobs prepared for the European Commission, February 2010.

Goos, M., Manning, A., Salomons, A., 2009. Job Polarisation in Europe, American Economic Review: Papers & Proceedings, vol. 99, no. 2, pp.

58-63 online at http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.2.58. Goos, M., Manning, A., Salomons, A., 2010. Explaining Job Polarisation in Europe: The Roles of Technology, Globalization and Institutions,

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Sondergaard, L., Murthi, M., (coord.) 2012. Skills, Not Just Diplomas. Managing Education for Results in Eastern Europe and Central Asia, The International Bank for Reconstruction and Development / The World Bank, www.worldbank.org.