Remarks About Labour Market Forecasts

“From the neo-classical perspective, the labour market is dynamic and very hard to predict.

This implies that the principle of educating the appropriate numbers of students with the S*

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Base scenario in year t Scenario 1 in year t+n:

Excess of labour Scenario 2 in year t+n:

Shortage of labour

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right mixture of skills, ready to enter labour market in ways that bring supply into balance with demand, will often fail. Thus, the core argument suggested by proponents of neo-classical economics theory is to recognise the inability of society to anticipate long-term labour market needs, and hence not to sequence highly focused educational activities towards those anticipated needs, as commonly are the main target with VET (Monk, 2000).”

(Lindell, Johansson 2003. page 111)

“Instead, neo-classical oriented economists, notably proponents of human capital theory, emphasise types of education which are more broadly instrumental in promoting versatility and resilience, hence enabling students to move from job to job. As a result of this kind of thinking, the human capital economists tend to see academic forms of education as the better hope of economic growth (Becker, 1964/1983).” (Lindell, Johansson 2003. page 111)

It is a difficult task to make adequate projections of future labour market qualification needs, in particular concerning long-term prognoses. It is also generally agreed that available statistics are unable to provide education planners with precise information.

Consequently, projections should be interpreted as indications of what is necessary, to achieve efficient matching between demand and supply on the labour market, rather than the most probable development. The purpose of this paper is not to discuss neo-classical scepticism regarding the feasibility to forecast future qualification needs. However, it is interesting to consider some examples highlighting how the projections can be interpreted within the Swedish system of qualification supply. The central question is concerned with the information value for education planners, rather than for individuals and employers.

Some qualification needs are relatively straightforward to identify, for example occupations with clearly identifiable qualification demands. This is most notably in professions such as medicine, nursing, teaching, etc. but also within several other more general occupations. Nevertheless, for the majority of professions, it is likely that more that one type educational background could match the demand for labour with adequate qualifications. HSV (1999a, 2002c) states that the prognoses are generally too strongly focused on previous graduations and programmes. This does not reflect the general trend among university and university college students where participation in programmes leading to a professional degree account for a diminishing share of total students in higher education. Students tend to choose courses according to their own interests and perceptions of what composes a good combination. This normally leads to a general graduation, which could be similar to a traditional professional degree but it could also be an alternative to a professional degree, depending on the choice of courses. Likewise, the forecasts cannot account properly for new interdisciplinary education tailor made according to the demands of clients and co-operation partners. The issue is particularly important since the Government explicitly emphasises the importance of interdisciplinary education in order to provide the labour market with multidisciplinary qualifications. HSV (1999a, 2002c) also argues that too little weight is given to general graduations that can be utilised within different areas, which implies that the qualification supply is underestimated. AMS (2002c) underlines the difficulty to relate upper secondary

education non-vocational programmes as well as more general higher education programmes with inflows to a specific sector.

Another problem is that the forecast by Statistics Sweden cannot fully account for outflows from higher education in cases where the education was not completed.

An analysis of the graduation rate referring to students starting university or university college education in 1993/94 revealed that 50 percent had graduated in 1999/00. One third of those who did not graduate had completed courses corresponding to a three-year full time study. It was also shown that graduation rate varied between educational groups. It was higher for education leading to a professional graduation (e.g. medicine, nursing, teaching, etc) and lower for general graduations (e.g. bachelors’ and masters’ education). HSV (1999b) argues that a formal graduation is not the sole intention of persons engaged in higher education.

The expansion of distance education and the implementation of life long learning implies that many students have other aims than graduation. Others end their studies before graduation due to employment opportunities or to continue their former jobs.

This development is to a large extent planned and supported and it would be wrong to base conclusions about qualification supply based merely on the number of graduations.

The forecasts also have a potential to change rapidly, and identified trends vary due to different forecast periods, the information available, different aims and methods, etc. For example, the long-term forecasts are normally based on register data and assumptions about labour market developments and flows. In contrast, the short-term forecasts are based on interviews with employers. Regarding the long-term forecasts it is obviously a difficult task to predict the next two decades based on the developments during the last two decades. Fundamental conditions vary, in particular regarding the demand for labour, which is based on different judgements of the economic trend employment outlooks, sector composition, future qualification requirements, etc. Thus, it is difficult to find something that can be considered a

‘normal’ situation for the labour market during the last 20 years. This in turn, means that simple trend analyses do not provide much direction for the future.

Two factors highlighted by SCB (2002b) could serve to exemplify the type of difficulties encountered: i) Will the structural changes during the 1990s have permanent or temporary consequences for unemployment and people’s participation in the world of work? ii) Which are the long run implications for labour market participation of the new pension system – where the pension is based on lifetime income – and the growing number of people spending more time in education? The calculations of educational supply assume essentially stable educational dimensions and the impact of labour market disequilibria on individual decisions, educational dimensions are disregarded in the analysis, and employers’

demand is assumed unaltered by the supply of competences. Likewise, the forecasts can obviously not take the innovation of new jobs and new types of education into consideration. An evaluation of SCB’s earlier forecasts showed that that the precision

of judgments regarding the demand for labour by branch has been relatively low, whilst the prognoses of needs in terms of professions have been more reliable.