Combining job mobility patterns and vacancy data to better measure labour market opportunities and skill mismatch

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The Covid pandemic brought about an unprecedented labour market shock. Job opportunities in sectors like hospitality disappeared overnight, whilst opportunities expanded in other sectors like driving and healthcare. This radical restructuring of the economy called for a new way of measuring the labour market prospects facing individuals that captured their widely-varying ability to adapt to the shock by moving into alternative lines of available work. Motivated by this, we developed a new worker-specific measure of labour market opportunities. Our measure is based on historical patterns of job-to-job moves, which we use to infer how suitable a given worker is for different types of jobs. Combined with high-quality data on vacancy postings, this allowed us to look beyond aggregate measures of labour market performance and quantify important differences in the labour market prospects facing different types of workers over the pandemic (Costa Dias et al 2021, Joyce et al 2022). While our innovation was triggered by the pandemic, the usefulness of our method is much more general and wide-ranging. Our method links the state of the labour market in one part of the economy to the rest of the economy, meaning that it could be used to answer questions like: how do shocks in retail affect wage pressures and career progression for delivery drivers? How do changes in the wider labour market affect the ability of the social care sector to recruit and retain workers? Our method further provides insights into the extent to which workers' skills align with the skills demanded by employers - the extent of labour market 'mismatch' - which has implications for productivity and economic growth. For example, if the older workers who have recently left the labour market were to come back, to what extent could this ease labour shortages in specific occupations? Where in the economy are skills shortages most acute, and what is the economic cost of mismatch in terms of aggregate productivity?The aim of this project is to extend and refine our new method, grounding it in a theoretical search and match model, and demonstrate its applicability to substantive questions and its advantages over traditional methods. We will refine our index to capture variation in opportunities arising from competition for jobs from different types of jobseekers, as well as variation in the skills demanded by employers (captured by our current index). We will then demonstrate its utility by applying it to empirical, policy-relevant questions like the ones above - in particular, in identifying the variation in labour market opportunities across workers and over time, and in quantifying the extent and economic cost of labour market mismatch in the economy. A key part of embedding this innovation within future research and statistical practice will be dissemination and engagement with others - not only after the project is done, but during its production, helping us to maximise its usefulness. The main target audiences will include the research community, statistical practitioners (e.g. ONS), and policy-makers - since the ultimate purpose of our innovation is to better guide policy-making, and through achieving impact on policy-makers we will further highlight the potential of our innovation within future research.