Skill matches to job requirements

Australia’s ageing population has resulted in a policy focus on keeping older workers in the workforce for longer. One set of issues is the relationship between the skills of older workers and the skill requirements of jobs available to them. There are several implications of a mismatch between skill level and skill requirements. Older workers with skills that are not being used could be put to better use. On the flip side, if the skills of older workers are not high enough to meet the requirements of their jobs, it would be difficult to encourage them to stay in the labour market longer. If this is the case, could increased participation in training by older workers help them to fulfil the requirements of their jobs, and hence encourage them to stay longer?

This report looks at the relationship between literacy and numeracy skills and their use in the workplace, paying particular attention to older workers. The analysis allows us to see whether workers in certain age groups are mismatched to their jobs, based on the literacy and numeracy skills they have.

Key findings

• Across all age groups, workers with higher literacy and numeracy skills work in jobs that make more use of their skills compared with workers with lower skills.

• Older workers make as much use of their literacy and numeracy skills at work as younger workers. Skill mismatch does not seem to be a problem that affects older workers any more than their younger counterparts. This suggests that older workers do not appear to be moving into less demanding ‘transition’ jobs in preparation for retirement.

A second report from this program of research, which looks at how the relationship between skill level and job requirement affects the propensity to undertake further education and training, is available from the NCVER website. An overview that summarises the findings from these two reports is also available.

Tom Karmel
Managing Director, NCVER

This study examines the relationship between the skills of workers and the skill requirements of the jobs in which they work in the Australian labour market and pays particular attention to older workers. We aim to generate empirical evidence on the extent to which older workers apply their skills in the workplace. Against the background of changing labour market conditions and in the light of an ageing Australian workforce, which may require individuals to work beyond current retirement age norms, it is important to assess whether older workers apply their skills at work to the same extent as younger workers.

To date, there is little empirical evidence on the relationship between direct measures of individual skills and the skill requirements of their jobs in the Australian labour market. Skill mismatches may create high costs through a loss of productivity associated with wasted skills, consequent low job satisfaction among workers and higher resulting turnover rates. With regard to the concerns about unmet demand for high-skilled workers in the Australian labour market, skill shortages could be reduced by reassigning high-skilled workers who do not make good use of their skills in their current jobs. With demographic changes, the extent to which older workers apply their skills in the workplace will become a matter of particular relevance if good use is not made of the skills of older workers.

We use two surveys conducted by the Australian Bureau of Statistics (ABS): the Survey of Aspects of Literacy (SAL) and the Adult Literacy and Life Skills (ALLS) Survey. These surveys were conducted ten years apart and contain comparable information on measures of worker skills— notably their literacy skills—as well as information on the frequency with which they undertake a range of literacy- and numeracy-related tasks. This exceeds the information available for analysis in most studies, where educational attainment is used as a proxy for skills. In addition, in this study we employ the use of skills in the workplace to construct measures of job requirements. We make use of a number of different variables that measure the tasks that individuals undertake their jobs. Specifically, job requirements are measured by self reports of individuals about their literacy and numeracy use at work.

By comparing individual skills and skill use measures, this study provides a comprehensive descriptive analysis of skill matches to job requirements for older workers in the Australian labour market. In the first instance, the aim is to trace out the skill match of older workers to jobs by estimating a ‘matching’ function that reveals the skill characteristics that are relevant for jobs involving specific tasks. We also compare these patterns between workers of different ages. Nothing in our analysis should be interpreted as suggesting that skills solely determine usage at work, or any single effect in the other direction. Obviously the various interactions between usage, skills and education are complex, so we tend to talk about the ‘match’ of workers with skills to jobs that require their use rather than any causal relationships.

The empirical findings of this study suggest that older workers apply their skills at work more often than younger workers, suggesting that there is no reason to be concerned about the misallocation of older workers to their jobs. Instead, the quality of employment opportunities available to older workers remains relatively high. This result was persistent over time and across birth cohorts. Specifically, between the surveys, the use of literacy skills at work increased across all birth cohorts of workers as they aged in our regression analysis.

The main findings of the study are highlighted in the points below:

Literacy use:

• Workers with higher literacy skills use them more often at work than workers with lower literacy skills.
• The level of literacy use increases with higher literacy skills, but at a declining rate.
• The average level of literacy is higher for workers aged over 40 years than for workers aged below 40 years.
• The average level of literacy use increases with level of education.
• Differences between male and female workers in literacy use at work have disappeared over time.
• Full-time employees and those employed by large employers report higher levels of literacy use at work.

Numeracy use:

• Workers with higher numeracy skills use them more often at work than workers with lower numeracy skills.
• The level of numeracy use increases with higher numeracy skills, but at a declining rate.
• Numeracy use also increases with level of education.
• The average level of numeracy use tends to be higher for workers between 40 and 59 years than for workers below 40 years and workers aged 60 years and above.
• Female workers of nearly all ages exhibit a significantly lower level of numeracy use at work than male workers, both in 1996 and 2006.

The overall conclusion from this paper is an optimistic one: older workers make at least as much use of their skills in their jobs as their younger counterparts. On this dimension at least, there is no additional reason to be concerned about their treatment in the labour market. Policies designed to encourage older workers to continue to upgrade their skills through life, therefore, do not need to focus on impediments to their use in jobs, but on the incentives for individuals.