Cognitive, social, and digital skills will be core skills of the labor market of the future. By contrast, manual skills will become less relevant, says a recent report published by a team of researchers at the Catholic University of Eichstätt-Ingolstadt (KU).
KU is participating in the international research project "Pathways to Inclusive Labor Markets" (PILLARS) led by Professor Simon Wiederhold, who holds the Chair for Macroeconomics. "Our major objective is to better understand what working in Europe could look like in the next few decades and which social groups will be left behind if nothing changes," explains Wiederhold. Based on their findings, the researchers hope to derive political strategies for the development of inclusive labor markets that specifically target groups such as the elderly and people with a migration background.
Together with his team of Christina Langer and Yuchen Guo, Wiederhold is responsible for six subprojects, five of which are grouped together in a work package on education. One of the core questions that Wiederhold and his team have been investigating since the start of the project in January 2021 is which skills will increase in importance over the years to come.
"Fundamental basic skills in mathematics and reading comprehension are a strong foundation that will still be needed in the future," says the economist. "In addition, basic digital skills will become increasingly important. We are not necessarily talking about programming skills or similar subject-specific knowledge, but rather the basic ability to work with computers, find your way around the internet, and the ability to manage one’s own data." He also adds social and cognitive skills, such as empathy, the ability to work in a team, as well as creativity and critical thinking to solve complex problems to the list of particularly important future skills. "These are skills that cannot simply be replaced by machines. By contrast, machines have become quite good at carrying out manual, craft tasks, and generally tasks that are routine in nature. They sometimes do this even better than humans."
Wiederhold’s team is particularly concerned about the question of how well European educational systems prepare future workers for the labor market and impart the necessary skills. "If there is little transformation happening in the labor market and the required skills are very similar to those of twenty, thirty years ago, the educational system does not have a problem," says Wiederhold. "However, things look entirely different when conditions and circumstances are changing rapidly—a trend we are currently witnessing and which is likely to continue," he adds. "Due to progressing digitalization and automation, we expect that the skills wanted yesterday will not be the skills that are wanted tomorrow."
The skills wanted yesterday will not be the skills that are wanted tomorrow.Prof. Simon Wiederhold, Chair of Macroeconomics, KU Eichstätt-Ingolstadt
One of the subprojects of the KU researchers takes a closer look at German educational and training curricula to investigate which skills are taught through the apprenticeship system. For the researchers, these data are a real stroke of luck, as the German apprenticeship system strictly follows standardized curricula. Wiederhold explains: "It is required by law that companies impart these skills and they are audited with regard to this. This means that by analyzing apprenticeship plans, we can obtain a comprehensive picture of what early career employees have to offer when entering the labor market." What is even more surprising is that Wiederhold’s team is one of the first to actually use these data for research. It is pioneer work that comes with a lot of effort: the curricula had to be codified manually, without the help of machines or algorithms—a task that took more than a year to complete.
By combining the skill content of apprenticeship occupations with labor market data at the Nuremberg Institute for Employment Research, KU researchers were able to identify how the skills imparted by the German apprenticeship system are valued on the labor market. "Here we can see that the three domains of cognitive, social, and digital skills have high returns throughout the career," says Wiederhold. "By contrast, manual skills that are predominant in many apprenticeships in Germany do not yield higher wages." In order to investigate the specific influence of technological change, the team of researchers is particularly interested in long-term comparisons: How did the economic value of the different skills develop over the last thirty years? According to Wiederhold, social and digital skills have witnessed a particularly steep growth in economic value over time because they are complementary to new technologies.
Social and digital skills are very profitable today because they are complementary to new technologies.Prof. Simon Wiederhold, Chair of Macroeconomics, KU Eichstätt-Ingolstadt
A prerequisite for a functioning labor market is that there is a match between workers' supply of skills and skills that are in demand by employers. Investigating potential skill mismatches is another central research subject of the KU team based on two large international datasets. For analyzing the supply side, they use the PIAAC data provided by the OECD, a type of "adult PISA" that contains detailed information on job environments and required skills in 37 countries.
To investigate demand for different skills, the team uses an innovative data source: online job postings. "These job ads often contain a complete job profile including the skills required from applicants—for us, this is the perfect opportunity to understand the needs of companies," explains Wiederhold. In order to obtain access to the millions of job ads, KU cooperates with the CRISP Institute at the University of Milano-Bicocca. CRISP experts conducted computer-automated content analysis and, together with the KU team, were able to link the skill information in the PIAAC data with those in the job ad data. "We make use of machine learning in order to merge the two data sets," says Wiederhold. "This has never been done before." Based on this, Wiederhold and his team analyze potential skill mismatches and then ask: Where is the mismatch more pronounced than elsewhere? And how can this be explained?
To understand how skill mismatches between the supply and demand side arise, another step is required: a detailed examination of individual regions. Linking macro and micro perspectives is a central feature of the entire PILLARS project. Analyzing the future of work across the whole of Europe entails the challenge of identifying major differences between, for example, the educational systems of different countries.
This is why the researchers have deliberately started with a bird’s eye view approach to identify and examine phenomena that can be observed across all of Europe and then analyze microdata for single countries, which are much more detailed. "The findings often correspond to what we have already seen from the bird’s eye view perspective. But we could not really pinpoint these results because they are much coarser than those obtained at the country level. In this context, combining European and country-specific perspectives is very useful," emphasizes Wiederhold.
Collaboration within the PILLARS project allows us to combine European and country-specific perspectives.Prof. Simon Wiederhold, Chair of Macroeconomics, KU Eichstätt-Ingolstadt
In line with this principle, Wiederhold and his team are also merging the dataset on skills imparted by the German apprenticeship system with data taken from online job postings they have acquired from Lightcast, the world’s largest provider of online job ad data. This allows them to compare required and provided skills on a small scale within Germany to identify possible mismatches.
Moreover, a glance at the US reveals that international comparisons are beneficial from a scientific point of view. In the US, the labor market is much better researched than in Europe. But the PILLARS project now shows that many of the patterns observed in data from the US can also be found in the European labor market, particularly with respect to the high value of cognitive and social skills. "For Germany, we have used a different dataset and methodology but have still obtained the same results," says Wiederhold. "This is a very exciting fact, as we can show that similar patterns emerge in very different contexts."
The multi-perspective approach of the project is not only guaranteed by its international orientation. PILLARS also has a practical perspective, as the team of researchers is regularly meeting with an international group of stakeholders consisting of representatives from companies, trade unions, and politics. This exchange provides new perspectives regarding the possible causes of the findings and their transferability into practice. Wiederhold is convinced by the holistic approach of the PILLARS project: "This research really suits my taste: It builds on exciting new data, has a relation to practice, and offers an international perspective. It allows us to see the big picture behind context-specific developments."
The PILLARS project is funded by the European Commission within the framework of the Horizon 2020 research and innovation program. The team of researchers includes experts from ten renowned partner institutions, amongst others in Germany, France, Italy, Great Britain, the Netherlands, and China. Economists, computer scientists, and economic geographers are part of the PILLARS team. The partners collaborate in international and interdisciplinary teams. KU is primarily cooperating with the ifo Institute in Munich and CRISP at the University of Milano-Bicocca. The project runs until December 2023.
PILLARS – Pathways to Inclusive Labor Markets
Wiederhold’s team is also examining ways to make up for skill deficits through lifelong learning. For this purpose, the scientists are collaborating with the ifo Institute in Munich and making use of the PIAAC data, which—for the very first time—provides information on digital skills assessed in an internationally comparable manner.
As expected, the analysis shows that job training increases digital skills. Such continuing education is really needed, as elderly workers in particular often lack even basic digital skills, for instance, either because they have no computer experience at all or are not able to perform simple computer-related tasks such as using a keyboard or a mouse. At the same time, job training for workers aged 55–65 years is more effective in increasing such basic digital skills than training for younger workers—presumably because the older workers more often lack these basic skills. However, it is still an open question to what extent elderly workers are actually offered IT courses, as companies may not see much benefit in teaching older staff how to use new software. "If it was indeed the case that older workers received significantly less training in how to use new technologies, this would be bad news on multiple fronts," says Wiederhold. "When talking about digital skills, we are also talking about social participation. Exclusion of older people would therefore not only be a problem for the labor market," he adds.