Title: Occupational changes and skill mismatch following Covid-19: implications for graduates in the UK
Funder: Economic and Social Research Council

Abstract: This study investigates how the distribution of workers across occupations has changed during the Covid-pandemic, and how such changes have affected the match between workers' education and the requirements of a particular occupation. This skill mismatch is likely to have increased during the pandemic, with an increase in the associated costs of lower earnings, lower job satisfaction and lower productivity. This study aims to: (1) evaluate the extent of occupational shifts (2) estimate the impact of the pandemic on the skill-mismatch, both nationally and regionally (3) analyse the uptake of training during the crisis and whether this reduces the skill mismatch. Analysing occupational shifts will provide vital understanding of how labour market opportunities are changing. Shifts in occupations could lead to a loss of human capital, if workers made redundant cannot find an alternative occupation matching their qualification. This can have long-term effects on their future career and on productivity. Training may offset this situation by allowing workers either to remain in their current occupation or to find a match where their skills are going to be valued. Although undoubtedly the repercussions of the pandemic affect all types of workers, we focus on graduates and younger workers since they are facing very uncertain job prospects and they are more likely to be at risk. They are also more occupationally and geographically mobile. Work by Vecchi (Co-I) and the ONS also shows that the incidence of overeducation is higher among graduates, which further justifies focusing on this group of workers.

Lay abstract: The overall objective of this study is to analyze how the Covid-19 crisis is affecting graduates' labor market outcomes, particularly in relation to their chances of finding employment in occupations that match their qualification. The literature shows that, before the current crisis, approximately a third of graduates in the UK were not employed in graduate jobs. This educational or skill mismatch generates several concerns among graduates, economists and policy makers. Graduates who are overqualified for their job suffer a wage penalty, i.e. they earn less than those who find a perfect job match. The skill mismatch is also associated with low job satisfaction and low productivity performance. The current crisis is having a strong negative impact on the labor market in terms of increasing the unemployment rate and causing a decline in the number of vacancies. The ways in which these might affect the skill mismatch and the wages of graduates are unknown. Sectors with high proportions of overqualified graduates, such as hotels and leisure, have been particularly hit by the crisis and this might lead to a decline in the mismatch. At the same time, many workers are losing their jobs and may not find employment in their existing profession or in occupations with the same skill requirement once the lockdown is over, a situation that would lead to a loss of human capital and an increase in the skill mismatch. Using the most up-to-date data, the first part of our study will address these issues starting with an analysis of the distribution of graduates across different occupations and how this distribution has changed over time (occupational shifts). This will provide an understanding of changing job opportunities for graduates. We will then focus on the evaluation of the skill mismatch and how this has been affected by the Covid-19 crisis. There is scant evidence of how periods of recession affect the mismatch, but our expectation is that the impact may be substantial, particularly for young graduates, who enter the labor market at a time of high uncertainty and increasing unemployment rates. Entering the labor force through occupations that do not match workers' qualifications could be a trap to continuing mismatch in the future. This may result in deteriorating career prospects and lower wage levels. In this context, provision of training becomes very important as it may increase the chances of either remaining in their current job or finding similar jobs in related sectors; it may also meet firms' needs for new skills. Policies directed towards supporting education and training were advocated after the Great Recession in 2007 to help displaced workers find new job opportunities. By analyzing graduates' uptake of training during the crisis we will assess whether this has improved their prospects and contributed to a reduction in the skill mismatch. Given the importance of a skilled workforce for productivity and innovation, understanding the status of training uptake could help us predict future availability of skills that are going to be crucial for the recovery. Our study also recognizes that overall trends for the UK labor market might hide important differences across UK regions. It is well know that there are increasing regional disparities in terms of productivity growth and wages across the UK and the Covid-19 crisis might exacerbate these differences and lead to increasing regional inequalities. Part of these inequalities may be related to differences in job opportunities for graduates overall, for young graduates and their ability to find employment in occupations that allows them to reap the benefits of their investment in human capital. Hence, a regional dimension of our analysis will complement the study of UK total trends and provide a detailed understanding of labor market opportunities for graduates.

Research activity codes: 1.2 PSYCHOLOGICAL AND SOCIOECONOMIC PROCESSES
Health categories: GENERIC HEALTH RELEVANCE;INFECTION