A Web-Based Approach to Measure Skill Mismatches and Skills Profiles for a Developing Country:. Jeisson Arley Cárdenas Rubio
to work in a formal job but cannot find one. Furthermore, the majority of the Colombian unemployed population (36%) reported in 2016 that the scarcity of available jobs, according to their occupation, is the main reason why they stop looking for formal employment.
This evidence reveals a number of relevant facts: 1) informality and unemployment are relatively high in Colombia, even compared to the country’s regional counterparts; 2) labour supply trends reveal that both informality and unemployment rates are explained by structural rather than a cyclical component; that is, there is a significant and persistent portion of people who are looking for a job, however, they are not hired by the Colombian labour demand; 3) most people affected by the phenomena of informality and unemployment are the following groups: less than 29 years old, more than 58 years old, women, and characterised by a low level of education; and 4) a significant share of the workforce employed in informal jobs desires to work as formal workers.
As discussed in Chapter 2, to understand the potential causes of the informality and unemployment results, it is important to analyse also the Colombian labour demand. With a GDP per capita of 14,181.406 US dollars in 2016 (World Bank 2019) (three times less than the OECD average), Colombia is an economy in which employment is high in the service sector. Indeed, this sector encompassed 57.4% of Colombia’s GDP in 2013 and employed around 63% of the labour workforce in 2016 (as mentioned in Subsection 3.2.1). Moreover, most employment is offered by micro-, small or medium-sized enterprises. According to the ILO (2014), micro-enterprises (defined as units with up to 10 employees) account for 96% of the country’s companies, small enterprises (defined as units between 11-50 employees) represent 3%, while medium-sized (between 51 to 200 employees) and large enterprises (>200 employees) represent 0.5% and 0.1%, respectively. Consequently, 80.8% of the Colombian workforce is employed by micro-enterprises and SMEs (small and medium-sized enterprises31), and these enterprises contribute to approximately 40% of Colombia’s GDP (OECD 2017a). However, around 60% of those micro-enterprises were in the informal sector in 2010 (ILO 2014). All these indicators reveal that there is an important informal economy in Colombia that employs a high number of people in the service sector, specifically, in activities related to sales and retail.32
Many factors might explain why labour demand does not fully utilise the Colombian labour force. For instance, the high cost of hiring is one of the main factors that prevent formal companies from hiring more personnel (Bell 1997; Kugler and Kugler 2009; Mondragón-Vélez, Peña, and Wills 2010). Mondragón-Vélez, Peña, and Wills (2010) observe that in the Colombian labour market there are comparatively high non-wage costs (payroll taxes, health and pension contribution, among others) and a high minimum wage relative to the productivity level. These labour market rigidities restrict the formal sector to adapt to the business cycle, thus the size of the informal sector and unemployment increases.
Despite the high cost of hiring in Colombia, there is a relatively high vacancy rate. According to the Human Capital Formation Survey (EFCH, for its acronym in Spanish) carried out by the DANE in 2012 (DANE 2018b), around 80.4% of open vacancies were related to sales and retail activities, and 87.6% and 94.4% to the service and industrial sectors (excluding sales and retail activities), respectively. Moreover, most new vacancies related to sales and retail activities were generated in the area of marketing and sales (68.6%), while in the industrial and services sectors (excluding sales and retail activities), most new vacancies were generated in the production area (66.9% and 82.2%, respectively).
Thus, Colombia’s labour demand suggests that, even with the relatively high cost of hiring, while there are formal vacancies available, there are also a high number of unemployed and informal individuals who are willing to work in formal jobs, but who do not do so. Consequently, there is a mismatch between supply and labour demand.
3.3. Skill mismatches in Colombia
As presented in Chapter 2, skill mismatches occur where the labour demand and supply of skills are not aligned (UKCES 2014). This misallocation of skills might explain why some countries face high unemployment and informality rates, and, at the same time, a relatively high portion of companies complain about the scarcity of accurate human resources. Consequently, the skill mismatches framework might explain a considerable portion of the labour market outcomes in Colombia (as presented in the previous section).
Globally, Latin America possesses the largest gap between the labour demand and supply of skills (OECD 2017b). In this region, around 44% of companies in 2016 experienced difficulties finding accurately trained candidates (skill shortages) (ManpowerGroup 2016). For Colombia, this rate is even worse, as around 50% of companies face problems filling vacancies due to a shortage of skills (OECD 2017b).
The Beveridge curve for Colombia (that depicts the relationship between unemployment and vacancies to determine how well, or not, job vacancies correspond to unemployed workers) illustrates a deep and constant labour market mismatch (Blanchard and Diamond 1989). According to Álvarez and Hofstetter (2014), Colombia has a relatively high level of vacancies and unemployment, which suggests that a lack of skills in the workforce (skill shortages) is one of the main reasons for Colombia’s labour market mismatches.
Moreover, the 2012 EFCH shows that around 62.1%, 67.2%, and 61.7% of employers in the industrial and service sectors, as well as in sales and retail activities, respectively, cited skill shortages33 as the leading cause of difficulties to find suitable workers. In addition, low productivity/poor performance and lack of specific competences were selected as main reasons to fire workers (around 34.4%, 40.9%, and 33.1% in the industrial and service sectors, and in sales and retail activities, respectively). Thus, the lack of worker skills is a key problem in Colombia, especially in the service sector. In particular, there is a large shortage of technical specialists, and a surplus of unskilled workers and middle management professionals (OECD 2015a).
Although the average year of educational attainment has increased to around six years during the last four decades for all age ranges (World Bank n.d.), Colombia remains a country with relatively low levels of education: in 2012, only 42% of Colombian people between 25 and 64 years old reached at least upper secondary school education, around 33 percentage points below the OECD average and just above Mexico in Latin America; whereas only 20% of adults completed a tertiary level of education (12 percentage points below the OECD average) (OECD 2014b). In addition, the Programme for International Student Assessment (PISA), which evaluates education systems worldwide by testing the skills and knowledge of 15-year-old students, reveals a low student performance in mathematics in Colombia. Almost 75% of students fail to achieve the baseline level of knowledge in mathematics, which contrasts with the OECD average of 23%. A low proportion of students (around 0.3%) are top performers, 12 percentage points below the OECD (OECD 2014b). Moreover, based on the Colombian household survey, the Gran Encuesta Integrada de Hogares (GEIH), only 9% of the working-age population during 2014 took a technical or vocational education and training course.
It is not only companies that have observed a large deficiency of skills. Arango and Hamann (2013) consulted an important group of labour market analysts (15 experts) in Colombia about the leading causes of unemployment. The majority (67%) agreed that skill mismatch between labour demand and supply was the main cause of unemployment in the country. Consequently, 60% of the experts recommended strengthening information systems to improve the efficiency of matches between employers and employees.
Thus, there is a generalised consensus between labour market experts and national and international institutions that lack of skills is one of the main reasons for skill mismatches in Colombia. Consequently, as explained in Chapter 2, one of the main issues faced by Colombia is that people, education and training providers, and the government are making decisions about human capital investments based on the currently available labour market information. However, these