NBB Study Finds Labor Market Mismatch in Belgium – By Max Berre

In a study published by the NBB, Belgium’s Central Bank, the bank finds that the labor market in Belgium suffers from a simultaneous shortfall in highly-skilled job applicants and surplus in low-skilled labor. Drawing on statistics provided by the regional employment services, Actiris, FOREM, and VDAB, the NBB determined that while there is a large pool of vacancies that are neither filled nor cancelled, unemployment is persistently high.  While Belgium’s unemployment stood at approximately 10.5% for 2011, the job vacancy rate stood at around 1.3%. For every eight unemployed people, there was one vacancy that went unfilled. The report also found that lack of geographic mobility was part of the problem.

The NBB report makes use of a qualification-mismatch-index to aggregate the mismatch of labor supplied and labor demanded at various education levels in the economy, in which, Belgium’s mismatches outweighed those of most of Belgium’s peer countries. “From a European Perspective, Belgium has the highest index of the EU-15 countries” concludes the report.

The NBB report mentions theoretical sources of labor market mismatches as being either frictional or structural. In the former case, the burden of the mismatch between the job-seeker’s profile and that demanded by employer is borne by the job-seeker during recessions. While, this is by definition temporary in nature, this is exacerbated in practice by over-inflated selection criteria or by weak rates of acceptance, as is sometimes been reported to be the case in Belgium, particularly involving older applicants and non-European applicants. In the case of structural mismatches, the problem revolves around long-term incompatibilities, such as educational differences and lack of geographic mobility. Labor market mismatch is problematic because it can easily lead to long-term unemployment among segments on the job market, thus affecting Belgium’s long-term competitiveness.

Belgium’s regional differences were also taken into account. According to the NBB report, the mismatch is most acute in the Brussels Region. While many job-seekers residing in the Brussels region are low-skilled applicants, Brussels’ employment market features a concentration of international institutions, public ministries, and high-end service sector positions.

The Role of Commuters

While commuting between the South and the North in Belgium is rare, significant commuter flows into Brussels is a major feature of Belgium’s labor market. “Whereas Brussels has roughly one position for every resident, jobs are held most of the time by resident of the other regions. Conversely, jobs in Flanders and Wallonia are held by their own residents are overwhelmingly performed by their own residents; commuting between North and South of the country is relatively rare, as is commuting by Brussels residents to the other regions, with the exception of the Brabant provinces.”

To put things into perspective, the NBB report states that 59% of commuters are resident in Flanders. Furthermore, VUB Professor Eric Corijn explains that commuters hold roughly half of the over 700,000 jobs in Brussels are currently held by commuters.

Given both the per capita regional GDP differences and layout of the country’s rail network, this is all quite logical. Rail connections between Brussels and most of Belgium’s other large cities have a travel time of less than one hour.

Ways to Confront the Mismatch

While the NBB report does not offer much in the way of policy response to the labor market mismatch, it specifically calls for structural solutions.

In practice, a structural solution might take the shape of expanding on the Active Labor Market Policies existing in Belgium. In both Flanders and Brussels, the state subsidizes language learning in order to improve regional mobility. Educational mismatches can be addressed by offering subsidized training for the sectors in which the vacancies are most acute, or expanding subsidized on the job training. As early as 1996, Ghent University Professor Bart Cockx published a study concluding that subsidizing on the job training would curtail incidence of job termination due to skill mismatches.

http://www.nbb.be/pub/01_00_00_00_00/01_06_00_00_00/01_06_01_00_00/20121008_dmismatches.htm

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