A Web-Based Approach to Measure Skill Mismatches and Skills Profiles for a Developing Country:. Jeisson Arley Cárdenas Rubio
restrictions or barriers can take different forms, such as excessive taxation or lack of certain worker characteristics (e.g. skills), that make it difficult to enter the formal economy. This framework suggests that informal firms and workers are a disadvantaged group.
On the other side, some workers and firms voluntarily choose to remain in the informal economy, based on their preferences for work and the net benefit of being in the informal versus formal economy. In order to belong to the formal economy, workers and firms need to incur certain costs, such as tax revenue, health, and work insurance, and, in return, the state must provide benefits, such as health care, access to credit, etc. However, these benefits might not compensate for the cost of formality (such as taxes). Thus, informal economy can be an “escape” for workers and firms to avoid the formal economy and its failures related to the provision of services (Perry et al. 2007). These facts highlight that the benefits of being in the formal economy are not enough to move some agents into this economy.
Informal economy is usually a term that describes individuals working in unregulated jobs and is associated with inadequate working conditions, lack of social security, lower productivity, limited access to the financial system, etc. As Perry et al. (2007) pointed out, the size of the informal economy is relevant because it affects a country’s productivity and growth. Informal firms might experience more barriers to access credit, broaden their sale markets, and innovate, which might reduce their potential productivity. For instance, the lack of social protection and other work risks might result in a lower incentive for establishments to invest in human capital (see Section 2.4) and lead to lower worker productivity.
Informal economy, along with unemployment, is considered one of the most important indicators to measure well-being in the labour market (OIT 2013; Mondragón-Vélez, Peña, and Wills 2010). Both phenomena are prevalent in Latin American economies and reflect a vast underutilisation of the labour supply. This result reveals the inability of Latin American economies to generate “quality” employment for those who want to work and can work (ILO 2019a). For these reasons, it is essential to measure and consider informal economy in the analysis of any country’s labour market, especially in countries like Colombia where the informality rate is comparatively high, at around 49.4% in 2016 (DANE 2017a) (see Chapter 3).
To conclude this subsection, informal economy is a relevant phenomenon, which affects different socio-economic outcomes, such as productivity, social protections, etc. The high incidence of the informal economy in Latin American countries like Colombia makes it an important factor to be considered in Colombian labour market analysis. However, this term might cover a variety of activities that can be measured in different but correlated ways. Despite some limitations, the Colombian literature suggests that a valid criterion to classify workers as informal is based on company size, which is the one adopted in the official Colombian labour market statistics and in this book.
Related to unemployment, the informal economy phenomenon might arise due to an extended number of factors; rigid wages, comparatively high non-wage costs, technological shocks, and discrimination (e.g. gender preferences) are examples of such factors, and a vast body of theoretical frameworks have been developed to analyse their role. One of these theoretical frameworks stresses the importance of skills in labour market outcomes, such as unemployment and informal economy. Individuals possess different labour characteristics that make them more or less productive for specific jobs (Albrecht, Navarro, and Vroman 2007), so while companies hire labour with different attributes to perform different tasks and produce their products, the misallocation between the skills possessed by workers and the skills demanded by employers might influence unemployment and informality rates.
This framework might be applied in a context such as Colombia where there is a comparatively high portion of companies complaining about the skills of the labour supply, and at the same time there is a high proportion of workers desiring formal jobs (Chapter 3 provides a detailed discussion of the Colombian context). Thus, worker skills are important for the economy, which is examined in more detail in the following subsection.
Skills are a relevant factor that have strong implications for employment outcomes, such as productivity, wages, job satisfaction, turnover rates, unemployment, informal economy, etc. (Acemoglu and Autor 2011; OECD 2016a). However, the concept of skills can be understood and interpreted from different perspectives: social constructionist, positivist, and ethnomethodological, among others (Attewell 1990; Green 2011; Warhurst et al. 2017). Additionally, there are multiple typologies of skills (e.g. worker skills and skills as attributes of jobs). Thus, this section discusses the definition of skill adopted in this document to analyse labour demand based on information from online job portals.
2.2.4.1. Defining skills
Each school of thinking emphasises the importance of different elements that should be considered by the concept of “skill.” Within the social constructionist school, for instance, skills are a complex construction of job tasks, labour supply and demand, and certain social conditions (Vallas 1990). Consequently, skills are defined by the tasks associated with each job, together with the capacity to enclose a number of people into a profession or career. Therefore, as Gambin et al. (2016) pointed out, from a social constructionist perspective social “norms” and task complexity determine what a valued skill means. This approach is part of an ongoing, subjective, and extended debate in which it is difficult to delimit what social processes might affect the construction of skills in a particular society. Consequently, the social constructionist school often finds it challenging to generalise and compare skills between different societies or groups (Green 2011).
The positivist approach emphasises other aspects. This approach states that skills are objective attributes of individuals or jobs, which are independent of the observer. This view focuses on obtaining uniform skill measures to provide the most precise skills indicators for positivist-based research (Attewell 1990).
Even though there are different ways to define “skills,” most perspectives agree that the concept of skills is strongly related to task complexity required to carry out a specific job. In concordance with Green (2011, p. 11): “all skills are social qualities, yet are rooted in real, objective processes, not in perceptions.” Thus, this book interprets skills as attributes of people or jobs, which are required to perform certain tasks in the labour market. Consequently, in this document, skill refers to any measurable quality that makes a worker more productive in his/her job, which can be improved through training and development (Green 2011). Simply put, according to Gambin et al. (2016), a skill refers to “the ability to carry out the task that comprises a particular job.”
This perspective might be particularly helpful to ease the operationalisation of skills into quantitative measurements (to provide easily measured variables), as well as to enable policymakers and researchers to obtain precise quantitative results to produce straightforward public policy recommendations (Attewell 1990), which is also one of the main objectives of this document. However, this positivist viewpoint has some limitations; for instance, to measure a skill with a variable like years of education could be considered reductionist. As will be discussed in the next subsection, variables like education might fail to properly measure skill acquisition and job performance (Attewell 1990).
Despite the limitations present in all schools of thinking, a positivist perspective (frequently presented in economic studies) is adopted in this document in order to provide imperfect but sufficiently reliable and valid indicators for public policy recommendations regarding skills within vacancy data on online job portals. This definition of “skills” still encompasses many elements, such as qualifications, competences, education, and aptitudes, among others (Green 2011), which can be measured by different indicators depending on the typology used and the tools available to measure those qualities (skills). The economic literature has used a variety of proxies to measure the different dimensions of skills in the labour market, some of which are limited, since a portion of the typologies overlap, while others do not make a clear