The distribution of skills among the European adult population and unemployment: a comparative approach

Abstract

The most painful effect of the Great Recession in European countries has been the surge in unemployment rates during a period that has been characterised by an increase in income inequality and the heterogeneous pattern of this inequality by educational level. Thus, workers with low levels of educational attainment were among the first to lose their jobs. This article addresses two main research questions: first, it estimates the importance of the level of skills and education on the probability of being unemployed, disentangling the extent of the effects of human capital and signalling theories of education; and, second, it provides evidence of the impact of inequalities in the previous socioeconomic and cultural background of individuals on the probability of being unemployed. These two objectives are assessed using data for 24 jurisdictions that participated in the first round of the OECD's Programme for the International Assessment of Adult Competencies (PIAAC). Skill levels play a central role in explaining unemployment in Europe and act as an indirect channel via which a family's sociocultural background has an impact on its labour market status. Combining the results of alternative models, we identify those European labour markets that are most sensitive to human capital.