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Adaptability of the workforce in Europe: Changing skills in the digital era

Digital technologies make significant impact on labor market, primarily by complementing or by substituting workers. This has triggered a change in the set of skills that are required from workers, by putting stronger focus on problem-solving skills, creativity, socioemotional skills, functional literacy and technical skills related to the use of digital technologies. The effects of digitalization on the labor market and economic performances of a particular country in the future depend on the workforce adaptability, industrial and occupational structure, the skills mix, organization of work and current state of digitalization. The aim of this paper is to evaluate the degree of workforce skills adaptability in 30 European countries, using the OECD data on achievement in reading, math and science, as well as the data on digital competencies, inclusion in lifelong learning and subjective perception on ability to find a new job. Our results suggest positive relationship between adaptability and PISA results. Using the principal component analysis, cluster analysis and LCCA (latent class cluster analysis), we find that European countries can be grouped into three clusters, in terms of adaptability: high performing (North and Western Europe), medium performing (Central Europe and Baltics) and low performing (South and South-eastern Europe). For some countries, low levels of adaptability of the workforce can pose an important obstacle for future growth and development.