A new measure of skill mismatch: Theory and evidence from PIAAC

This paper proposes a new measure of skill mismatch to be applied to the recent OECD Survey of Adult Skills (PIAAC). The measure is derived from a formal theory and combines information about skill proficiency, self-reported mismatch and skill use. The theoretical foundations underling this measure allow identifying minimum and maximum skill requirements for each occupation and to classify workers into three groups: the well-matched, the under-skilled and the over-skilled. The availability of skill use data further permits the computation of the degree of under- and over-usage of skills in the economy. The empirical analysis is carried out using the first round of the PIAAC data, allowing comparisons across skill domains, labour market statuses and countries.