This document summarizes a presentation on measuring skills supply and demand using an OECD diagnostic tool. The tool classifies local labor markets into four categories based on the balance of skills supply and demand: skills shortages, high skills equilibrium, low skills equilibrium, and skills surplus. The presentation provides examples of applying the tool in Italy, the US, and Ireland. It also discusses factors that influence a region's classification and highlights some best practices for addressing skills imbalances.

1. 9th Annual Meeting
IMPLEMENTING CHANGE:
A NEW LOCAL AGENDA FOR
JOBS AND GROWTH
In co-operation with the EU Presidency, Irish Government and Pobal
26-27 March 2013, Dublin-Kilkenny, Ireland
WORKSHOP G: DATA FOR POLICY DESIGN AND IMPACT ASSESSMENT
Sergio Destefanis
Professor of Economics, Department of Economics, University of Salerno, Italy

2. OECD-LEED 9th Annual Meeting
26-27 March 2013, Dublin-Kilkenny, Ireland
Sergio Destefanis
destefanis@unisa.it
(Università di Salerno and CSEF, Italy)
Measuring skills supply and demand - OECD LEED
diagnostic tool and its application in selected regions

3. Outline
• The OECD-LEED diagnostic tool: definition and
conceptual framework
• Background
• Applications
 Italy
 USA
 Ireland
• Some concluding remarks

4. The OECD-LEED diagnostic tool: definition
As part of its Skills for Competitiveness project, 2009-2011, the
OECD LEED Programme developed a statistical diagnostic tool
geared to understand the balance between skills supply and
demand at the local level (TL3/NUTS3 or travel to work areas).
According to this approach, local labour markets can fall into four
different situations: low skills equilibrium, skills shortages, skills
surplus, high skills equilibrium.

5. The OECD LEED diagnostic tool
SKILLS GAPS AND HIGH SKILLED
SHORTAGES EQUILIBRIUM
Demand
LOW SKILLED SKILLS SURPLUS
EQUILIBRIUM
Supply

6. Conceptual framework
SKILLS SHORTAGES HIGH SKILLED EQUILIBRIUM
Low % post-secondary education High % post-secondary education
High % high skilled occupations High % high skilled occupations
High wages/high productivity High wages/high productivity
LOW SKILLED EQUILIBRIUM SKILLS SURPLUS
Low % post-secondary education High % post-secondary education
Low % high skilled occupations Low % high skilled occupations
Low wages/low productivity Low wages/low productivity

7. Background
• The diagnostic tool has been tested within the Skills for
Competitiveness project for Canada, Italy and the UK.
• As a contribution of the LEED programme to the OECD Skills
Strategy, the diagnostic tool approach has been extended to
localities in all OECD countries.
• Available online there are currently data for 12 countries:
Belgium, Canada, Czech Republic, Denmark, Finland, Korea,
Italy, Netherlands, Norway, Sweden, UK, USA
 see skills.oecd.org
• Indicators for other countries (Australia, Austria, France,
Greece, Hungary, Slovenia) are virtually ready.

8. Applications
There are various fundamental issues in implementing the
diagnostic tool:
• What are the proxies of skills supply and demand?
• Do we select country-wide or sectoral medians in order to
single out the quadrants?
• At which territorial level is the analysis to be carried out?
Below we illustrate some practical answers to these questions,
also highlighting some examples from Italy, USA, Ireland.

9. Labour market performance according to the
diagnostic tool typology – Italy 2001-2009

10. Skills supply and demand in Veneto and Campania (Italy) 2001

11. Skills supply and demand in Veneto and Campania (Italy) 2009

12. Multinomial Logit model – Italy 2001 and 2009.
What determines a province's location in a given quadrant?
SKILLS SHORTAGES HIGH SKILLED EQUILIBRIUM
Correlates: Correlates:
Strong 2-ary sector Strong 3-ary sector
Large population Large population
Lower share of temps
“Attractive” university
LOW SKILLED EQUILIBRIUM SKILLS SURPLUS
Correlates: Correlates:
– “Attractive” university
(baseline case)

13. Best practices #1
The Distretto Calzaturiero del Brenta
• Involvement of many stakeholders: ACRIB (a local employers'
association), Politecnico Calzaturiero (private school of arts and
crafts), local unions, universities.
• Vocational training for all skills levels
• Highly successful product innovation, enacted by a network of
fairly small firms  sharing costs
• It tied firms from Venezia and Padova in one single
organisation, opened the way for cooperative mechanisms
uniting employers and workers, and for the establishment of
an innovative Territorial Council (Consulta Territoriale).

14. Best practices #2
• The 2011 Development Pact (Patto per lo Sviluppo...)
from Treviso province.
• This is a young reality, also exemplifying what is
happening in other areas (especially in Italy's North-
east).
• It is characterised by territorial joint (NOT firm-level)
wage bargaining and from a co-operative employers-
worker approach to employment and development.

15. Skills supply and demand in metro areas – unemployment rate, 2011 -
California

16. Skills supply and demand in metro areas – unemployment rate, 2011
Michigan

17. Skills supply and demand in Ireland, 2010

18. Skills supply and demand in Ireland, 2012

19. Concluding Remarks
• The diagnostic tool proved useful in classifying local areas
• There seems to be a clear relationship between an area's
position in the diagnostic tool and the unemployment rate.
This chimes in with various pieces of concurrent evidence (e.
g. Brookings Institution, 2012)
• A similar relationship with other performance measures is
being tested
• Much will be gained from the comparison of different
countries (with areas of different size), different proxies and
analyses of the diagnostic tool distributions. Measures of
dispersion may also be useful in this respect.