Labour market policies for the highly skilled (OECD STI Outlook)

Rationale and objectives

Labour market demand for highly skilled workers has grown rapidly as advanced economies have become increasingly knowledge-based. Given the importance of human resources for innovation, university graduates enjoy better work prospects, a higher wage premium and have more training opportunities than less educated workers (OECD, 2013a; OECD, 2014, forthcoming). They are less likely to remain unemployed, especially for a long time. They have suffered less from the global crisis (OECD, 2012a) and, unlike other categories of workers, employment for professionals and technicians, i.e. higher-skilled “non-managerial” occupations, showed signs of recovery between 2011 and 2012 (OECD, 2013a). Higher education is thus a factor in employability and lifelong learning.

Nonetheless, skills allocation in the labour market is not always optimal, as reflected in university graduates’ employment rates (Figure 8.4). These are affected by the mismatch between labour supply and demand, levels of unemployment, which can be temporary or lasting, and the degree of disengagement of workers from the labour force. While university graduates enjoy close to full employment in Iceland, Norway or Sweden, their employment rates are substantially lower in Greece and Turkey. Employment rates also show that females are underrepresented in skilled employment, although they often account for a higher share of tertiary studies. This is a common issue in all countries; the gender gap is particularly striking in Japan, Korea and Turkey. In addition they are more likely to work part-time (OECD, 2014, forthcoming). The unbalanced participation of minorities in scientific and technological (S&T) occupations has also been widely documented (NSB, 2014) (see also the policy profile on “Innovation for social challenges”).

While many countries are concerned by potential skills shortages in science and engineering, there is conflicting evidence from firms on the extent of “shortages” or of “overqualified” graduates in jobs that require lower level of expertise. Recent international survey data show for instance that between 10% and 40% of OECD doctorate holders do not work in research and many are in jobs unrelated to their doctoral degree, especially after a few years of their working life (Auriol et al., 2013).

The under-employment or mis-employment of the highly skilled, whether women or minorities or not, raises several issues related to the loss of competences for the market, the risk of skills erosion in the long run, and low return on public and private investments on education.

While education policies affect education systems and mainly support the supply of skills for innovation (see the policy profile on “Strengthening education and skills for innovation”), labour policies aim to raise the level of knowledge and skills effectively used by the labour force. Labour and employment policies address issues concerning both the demand for and supply of labour. Governments pull demand by supporting businesses that recruit highly skilled workers, especially the small firms that typically face difficulties for attracting skills. They can help improve the attractiveness of STI careers and steer supply by attracting foreign talent and boosting enrolment in science, technology, engineering and mathematics (STEM) studies. Labour policies encompass vocational training and mobility schemes and also ensure skills upgrading after schooling or university.

The demand for skills differs in different economies. First, the range of skills for innovation ranges from S&T capabilities to the so-called “soft skills” (e.g.management, communication, entrepreneurship). Second, the type of skills required varies widely across industries and firm size (Toner, 2009). Third, the optimal mix of skills is not static and varies over time. In some countries, moderately skilled jobs (as defined by wages) have declined owing to computerisation or the offshoring of routine and repetitive tasks, but growth employment has been strong in professions that require more abstract, cognitive skills (OECD, 2010a). Governments have a role to play in monitoring potential skills shortages and helping labour markets and the skills-formation system align objectives and capacities.

Major aspects

Demand-side employment policies help to reduce the costs for firms of hiring highly skilled workers (e.g. tax incentives for R&D expenditure, including wages, or payroll withholding tax for the highly skilled) (see the policy profile on “Tax incentives for R&D and innovation”).Theymay also cover the recruitment of young researchers (e.g. industrial PhD grants, postdoc fellowships). Other initiatives promote innovation in workplaces (e.g. adoption of new technologies and working methods) to help employers make the most of available skills.

Academia and public administration are major destinations of the highly skilled. The creation of research chairs in academia or high-level positions in public administration help steer demand for talent and support public-sector research and innovation processes, while generating good career opportunities.

Other employment policies aim to develop and upgrade the supply of skills. Acquisition of skills is an on-going process; it does not end with formal education (OECD, 2010a). Various financial instruments (e.g. frozen tuition fees, scholarships) or working arrangements (e.g. sabbaticals) promote adult education and on-the-job training. Some incentives are directed to firms (e.g. regulations and taxation for professional training).

Mobility during one’s career also provides learning opportunities. Measures to encourage intersectoral mobility aim to reduce regulatory barriers between institutions (e.g. portability of pensions or research grants) and to create opportunities for interaction between industry and science (see the policy profiles on “Public research missions and orientation” and “Commercialisation of public research results”). Policy initiatives to encourage international mobility include changes in laws on immigration or public employment (e.g. at universities), simplification of residence and work permit procedures, financial incentives to attract foreign or national highly skilled workers from abroad (e.g. stipends, tax incentives for highly skilled foreign workers, social security net), or provision of mobility services and networking facilities (e.g. one-stop shop, website, housing assistance).

Labour policies for innovation target researchers in particular. They aim to improve the attractiveness of research careers by increasing remuneration (e.g. new research funding, premiums on research output, including publications, academic spin-offs, teaching), improving employment conditions (e.g. reforms of recruitment and promotion systems, tenure career paths, work-family balance arrangements including parental leave and part-time work), and improving research conditions (e.g. increased autonomy for research, support staff, world-class research facilities). Targeted measures may support researchers at different stages of their careers.

Women and minorities are an untapped or underexploited talent pool that has attracted particular policy attention. There are initiatives to enhance their presence and visibility in senior positions (e.g. appointment to executive boards or peer-review panels) or to serve as role models in schools and higher education institutions. Financial incentives (e.g. targeted awards or research grants) encourage them to pursue S&T careers and conduct research. Targeted research grants can also help offset the obstacles they may encounter in obtaining research funding through general competitive processes.

Matching demand for and supply of skills requires maintaining an information system to monitor changes in labour demand and education capacities (e.g. firm surveys, forecasting analysis), providing job seekers and firms with platforms to meet, and establishing a skills or qualification framework to support recruitment and enable mobility and lifelong learning (e.g. recognition of informal learning). Co-ordination exercises between government, the business sector and education providers are essential, as is the participation of business-sector representatives in the design of the skills policy agenda (e.g. consultative processes), and the delivery of skills policy (e.g. executive boards at institutional level).

Recent policy trends

The OECD Innovation Strategy pointed to the need to empower people to innovate as an issue deserving consideration (OECD, 2010b). A number of OECD countries and emerging economies identified in their responses to the OECD STI Outlook policy questionnaire 2014 the strengthening of skills for innovation as one of their major national innovation policy priorities (see the policy profile on “National strategies for science, technology and industry”).

Labour policies for the highly skilled have changed less than other STI policy areas in recent years (Figure 8.5). Policy attention has focused on improving researchers’ career prospects, especially for junior researchers and women, attracting new talent from abroad, and building national frameworks and information systems to help better match demand for and supply of skills.

Improving the attractiveness of S&T careers is high on STI policy agendas both in OECD and non-member countries. Governments aim to strengthen job opportunities, especially in science and for young researchers and women.

New R&D jobs will be created in Belgium, France and Japan. Belgium (federal government) has increased public support for business R&D by raising the tax concession on payroll withholding for R&D wages to 80% (formerly 75%) as of 2013 and by fence-ringing the related tax budget against future budget cuts. France has planned to create 1 000 jobs in higher-education and public-sector research between 2012 and 2016, in a context of overall public employment decline. Japan’s New Growth Strategy (2009-20) aims to create over 4 million new jobs in life innovation and green innovation to provide young researchers with career prospects and ensure full employment of S&T doctorate holders.

Many recent policy initiatives have targeted young researchers by providing them with better terms of remuneration, new research funding, and new research and job opportunities in industry.

  • Estonia introduced a new research career model for PhD students in 2012 that extends social security coverage and increases remuneration in order to reduce dropouts during doctoral studies.
  • Italy established the Scientific Independence of Young Researchers programme in 2014 to fund research projects of young researchers. The CONACYT Chairs Initiative (2013) aims to create new positions for young researchers in Mexico on a competitive basis. Russia’s Federal Targeted Programme allocates new resources over 2014-16 to support researcher mobility, strengthen career development opportunities for recent PhD graduates and encourage researcher training abroad. Slovenia issued a public call in 2013 for research projects carried out by postdoctoral researchers in public research institutes and co-financed by industry in areas of strategic importance.
  • Under its Economic Action Plan 2014 Canada plans to expand the Mitacs Elevate programme, which currently provides postdoctoral fellows with industry-relevant research experience and training. Support will be provided for up to 3 000 new full-time internships for post-secondary graduates in fields of high demand over 2014-16. Korea has initiatives to reduce the gap between supply of and demand for young scientists and engineers in small and medium-sized enterprises. Measures include improving the industrial working environment, establishing a one-stop information network for jobs, encouraging pre-employment while studying, and attracting engineers from abroad.

Women’s participation in science remains an area of STI policy attention. The Initiative on Gender Balance in Senior Positions and Research Management (BALANSE) (2013-17) seeks to promote gender balance at the senior level in Norwegian research by financing female researchers’ projects and supporting research on gender issues. France has been implementing a series of actions to improve the number and visibility of women in science over the past years and in 2013 signed an agreement with four women’s associations to promote gender balance in scientific professions. Korea includes gender issues among the orientations of its 3rd S&T Basic Plan (2013-17).

Tapping into the global talent pool to enrich the national supply of skills has become crucial. Canada, Denmark, Germany and the United Kingdom have recently launched national strategies or action plans for the internationalisation of higher education. These include components of branding, inward and outward mobility of students and academics, and improving the learning environment (see Chapter 1 and the policy profile on “Internationalisation of public research”). Germany launched the Qualified Professional Initiative in 2012 to encourage STEM graduates with foreign academic degrees to pursue a career in Germany. The Czech Republic’s NAVRAT-Return programme (2012-19) aims to reverse a situation of brain drain by re-integrating outstanding national scientists working abroad.

Efforts have been made to build knowledge around future skills needs and to strengthen institutional capacity to monitor skills shortages:

  • New Zealand commissioned a project to assess ten-year career prospects in key occupations in order to inform students and education providers. Norway developed two forecasting models (one for the supply side and one for the demand side) to identify future skills needs. Korea conducted a National Forecasting for S&T Workforce (2013-22) and Ireland implemented in collaboration with industry the 2012 ICT Action Plan to increase the supply of high-level graduates in information and communication technology.
  • The Colombian Intersectoral Commission for Human Resources Management has been established to identify potential skills imbalances.

The governance of skills policy has also undergone changes, with new evaluation exercises, new strategic policy setting, and improved co-ordination of various public and private stakeholders.

  • New Zealand has conducted a stocktaking of post-PhD opportunities and post-doctoral positions to assess the efficiency of current policy settings.
  • Turkey adopted a new National Qualifications Framework in 2014. National qualifications frameworks are also being prepared in Colombia and Finland. In 2014-15 the Dutch Qualifications Framework will be simplified and made more transparent to meet private demand better and be more useful for vocational training institutes.
  • Several initiatives are under way in the United Kingdom, with a focus on strengthening vocational education and training. A 2013 UK publication, Rigour and Responsiveness in Skills, sets out the government’s vision of human resources and skills development policies and proposes a roadmap for reform, including of the vocational education system. The Higher Apprenticeship Scheme is being expanded to offer a new work-based route to high-level professions in industry that were traditionally restricted to graduates. The Employer Ownership initiative involves employers in the formulation of the skills policy agenda and enables them to deliver solutions for training their own workforce.
References and further reading

Auriol, L., M. Misu and R. A. Freeman (2013), “Careers of doctorate holders: Analysis of labour market and mobility indicators”, OECD Science, Technology and Industry Working Papers, No. 2013/04, OECD Publishing, Paris, http://dx.doi.org/10.1787/5k43nxgs289w-en.

Innovation Policy Platform (IPP), module on skills for innovation, available at www.innovationpolicyplatform.org/content/skills-innovation?topic-filters=11385.

National Science Board (NSB) (2014), Science and Engineering Indicators 2014, National Science Foundation, Arlington, MD, (NSB 14-01), www.nsf.gov/statistics/seind14/content/chapter-3/chapter-3.pdf.

OECD (2010a), Innovative Workplaces: Making Better Use of Skills within Organisations, OECD Publishing, Paris, http://dx.doi.org/9789264095687-en.

OECD (2010b), “Empowering people to innovate”, in The OECD Innovation Strategy: Getting a Head Start on Tomorrow, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264083479-5-en.

OECD (2011), Skills for Innovation and Research, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264097490-en.

OECD (2012a), OECD Science, Technology and Industry Outlook 2012, OECD Publishing, Paris, http://dx.doi.org/10.1787/sti_outlook-2012-en.

OECD (2012b), Better Skills, Better Jobs, Better Lives: A Strategic Approach to Skills Policies, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264177338-en.

OECD (2013a), OECD Science, Technology and Industry Scoreboard 2013: Innovation for Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/sti_scoreboard-2013-en.

OECD (2013b), OECD Skills Outlook 2013: First Results from the Survey of Adult Skills, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264204256-en.

OECD (2014), Education at a Glance 2014: OECD Indicators, OECD Publishing, Paris, http://dx.doi.org/10.1787/eag-2014-en.

OECD (2014), Science, Technology and Industry Outlook Policy Database, edition 2014, Labour Market Policies for the Highly Skilled, available at http://qdd.oecd.org/Table.aspx?Query=85FF94C1-A906-4768-AF07-8C768248E541.

Toner, P. (2009), “Workforce skills and innovation: An overview of major themes in the literature”, paper internal working document prepared for the OECDWorking Group on Research Institutions and Human Resources (RIHR), OECD, Paris.

Contributed by Sandrine Kergroach and Chiara Petroli, with comments from Laudeline Auriol, all of the OECD Directorate for Science, Technology and Innovation (DSTI).