How Can Skill Mismatch be Measured? New Approaches with PIAAC

Abstract

Measuring skill mismatch is problematic, because objective data on an individual skill level are often not available. Recently published data from the Program for the International Assessment of Adult Competencies(PIAAC) provide a unique opportunity for gauging the importance of skill mismatch in modern labor markets. This paper systematically compares existing measures of skill mismatch in terms of their implications for labor market outcomes. We also provide a new measure that addresses an important limitation of existing measures, namely, assigning a single competency score to individuals. We find that the importance of skill mismatch for individual earnings differs greatly, depending on the measure of mismatch used.