Labour market performance and migration flows - European ...

European CommissionOccasional Paper 60, Volume ISource: CEDEFOP, Future Skill Needs in EuropeThis modeling considers both replacement demand 168 and the additional demand 169 which will takeplace in the economy. If the additional demand were more sensitive to the ongoing recession, thereplacement demand which is mainly determined by exits from the labour market induced byretirement will constitute the larger component (80% of total demand) and, the highest-skilledposition, (legislator and professionals) 61% (See Table 2).So, the overarching inference is that if European countries want to remain competitive, given thehigh cost of labour, it is imperative that they turn towards more skilled production. This appliesespecially to southern European countries which still specialize in labour-intensive products,characterized by unskilled immigration and which do not risk the displacement of native workers inthe labour market, but which rather risk, in the short term, being overtaken in the goods market byeastern and fast-growing emerging economies.On the other hand, we note that AMCs, instead, produce skilled labour and that an excess supply ofeducated workers is noticeable. In Egypt for instance the labour force participation rate has a Vshape with the highest participation rate among the illiterate and the university-educated both inurban and rural areas (Assaad, 2007). The young male (15-29) unemployment rate is howeverincreasing with the level of education (Amer 2007), and is frictional for the level below middleschool and increases for general secondary, technical secondary, post secondary institute anduniversity (and above) where it reaches 25% of the total labour force. What is even more importantis that, in the last 20 years, it has increased from 15% to 25% with the increase in the investment ineducation.The lower unemployment rate of the less educated is usually explained by the lower reservationwage of the low skilled who accept any job offered to them. In this case the decrease in theunemployment rate of illiterates, and the increase in the unemployment rate of the more educated is168 The demand for new workers induced by age exit.169 The demand for new jobs.178