What cannot be taken over by machines: Which skills will be needed on the labor market of the future?

[Translate to Englisch:] Colourbox
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Cognitive, social and digital skills – these are core skills needed on the labor market of the future. By contrast, manual craft competences will become less relevant, says a prognosis published by a research team surrounding Professor Simon Wiederhold from the Catholic University of Eichstätt-Ingolstadt (KU). But will our educational system succeed in training the skills that are needed to the next generation? And what else is needed to prep the European labor market for the future? This question is currently being investigated by the Ingolstadt researchers in the context of the international research project “Pathways to Inclusive Labour Markets”, PILLARS in short.

Digitization and automation will profoundly change the world of work in the coming years. In order to be prepared for this, an international research team has come together at EU level in the PILLARS project. Also on board: Prof. Dr. Simon Wiederhold and his team from the Chair of Economics, especially Macroeconomics at the Catholic University of Eichstätt-Ingolstadt. "Our big goal is to better understand what work in Europe might look like in the coming decades, and which social groups will be left behind if everything stays as it is," explains Wiederhold. From this, political strategies for inclusive labor markets are to be derived, in which specific groups such as older people or people with a migration history also find a place. “Our major objective is to better understand what working in Europe could look like in the next decades and which societal groups will be left behind if nothing changes”, explains Wiederhold. From their findings, the researchers hope to derive political strategies for inclusive labor markets that also specifically include certain groups such as the elderly or people with a migration background.

KU researchers are responsible for six subprojects, five of which are grouped in an own work package on education. One of the core questions that Prof. Wiederhold and his team are looking at since the start of the project in January 2021 is which skills will increase in importance over the years to come. “Fundamental basic skills in mathematics and reading are a strong foundation that will still be needed in the future”, says the economist. “In addition, basic digital competences will become increasingly important. We are not necessarily talking about programming skills or similar specific knowledge, but rather the basic ability to work with computers, find your way around the internet and the ability to manage one’s own data.” He also added social and cognitive skills, more precisely empathy, the ability to work in a team and creativity as a means of solving complex problems to the list of particularly important skills. “These are skills that cannot simply be taken over by machines. By contrast, machines have become quite good at carrying out manual, craft skills, sometimes even better than humans.”

Team Pillars
Prof. Dr. Simon Wiederhold (center), Christina Langer and Yuchen Guo form the team for the PILLARS subprojects at KU.

Furthermore, the team of Prof. Wiederhold is particularly concerned with the question of how well educational systems in Europe prepare future workers for the labor market and impart the necessary skills. “If there is little transformation happening in the labor market and sought-after skills are very similar to those of twenty, thirty years ago, the educational system does not have a problem”, says Wiederhold. “However, things look entirely different when conditions and circumstances are changing rapidly – a trend we are currently witnessing and which is likely to continue.” Due to progressing digitalization and automation, we expect that the skills wanted yesterday will not be the skills that are wanted tomorrow.

One of the subprojects of the KU researchers thus takes a closer look at German educational and training curricula to investigate the skills to be taught. For the researchers, these data are a real stroke of luck, as the training system in Germany is strictly oriented to these plans. Wiederhold explains: “It is required by law that companies impart these skills and they are audited with regard to this. This means that by looking at these training curricula, we can paint a comprehensive picture of what early career employees have to offer when entering the labor market.” All the more surprising that the team of Prof. Wiederhold are the first ones to actually use such data for research. Pioneer work that comes with a lot of effort: In a first step, the plans had to be codified manually – a task that took more than a year to complete.

Higher wages for cognitive skills than for manual skills

By combining these findings with labor market data compiled by the Nuremberg Institute for Employment Research, KU scientists were able to identify how the skills imparted by the German educational and training system are remunerated. “Here we can see that the three domains of cognitive, social and digital skills are very highly remunerated – and this throughout the entire career”, summarizes Wiederhold. “By contrast, manual skills that are predominant in many craft apprenticeships in Germany are connected to lower wages.” In order to investigate the specific influence of technological change, the team of researchers is particularly interested in the long-term comparison: How have wages for the different skills developed over the last thirty years? According to Wiederhold, especially social and digital skills are more profitable today than in the past, because they are complementary to new technologies.

A prerequisite for a functioning labor market is that there is a match between supply and demand as regards skills. This point is another central research subject of the KU team. They use two international datasets to check matches and identify possible mismatches. For analyzing the supply side, they fall back on PIAAC data provided by the OECD, a type of “adult PISA” that looks at skills and collects data on jobs of professionals in 37 countries. In order to investigate demand for different skills, the team uses an innovative data source: Online job postings. “These ads often contain a complete profile including skills that are asked of the applicants – for us, this is the perfect opportunity to understand the needs of companies”, explains Wiederhold. In order to obtain access to the millions of job ads, the KU cooperates with the CRISP Institute at the University of Milano-Bicocca. CRISP experts take care of computer-aided content analysis and the ensuing merging of the PIAAC data set with the job ad data set, as the two data collection processes used different methods for obtaining information on skills. “We make use of machine learning in order to merge the two data sets”, says Wiederhold. “Based on this, we analyze potential skill mismatches and ask the question: Where is the mismatch more pronounced than elsewhere? And how can this be explained?”

Interlinking macro- and microperspectives

In order to understand, another step is required: The detailed examination of individual regions. Interlinking macro- and microperspectives is a central characteristic of the entire PILLARS project. Analyzing the future of work across the whole of Europe entails the challenge of major differences, for example in the educational systems, of the different countries. This is why the researchers take the deliberate approach of starting from a bird’s eye view to identify and examine phenomena prevailing across all of Europe to then analyze microdata at individual country level with the aim of obtaining statistically significant findings. “The findings often correspond to what we have already seen in the bird’s eye perspective. But we could not really pinpoint these results, because they are not as statistically valid as those obtained at country level. In this context, combining European and country-specific perspectives is very useful”, underlines Wiederhold.

In line with this principle, another project of Wiederhold and his team is to link the dataset on skills included in German training curricula that they collected themselves with data taken from online job postings. In this case, they look at German online job postings that the Ingolstadt team evaluate themselves. In this way, the researchers can compare sought-after and existing skills also on a small-scale level within Germany to identify possible mismatches.

A glance at the USA reveals that an international comparison is beneficial from a scientific point of view. In the US, the labor market is much better researched than in Europe. Now, PILLARS shows: Many of the US-American patterns can also be found on the European labor market, amongst others as regards higher remuneration of cognitive and social skills. “For Germany, we have used a different dataset and methodology but still obtain the same results”, says Wiederhold. “This is a very exciting fact, as the findings can obviously be transferred to very different contexts.”

Early-career researchers attending international conferences

The international exchange within the project also served the purpose of promoting young scientific talents: Experienced researchers as Simon Wiederhold and the other Work Package Leaders provide feedback on projects of early-career researchers in regular research seminars. For Wiederhold, it is also very important to enable young researchers to actively participate in international conferences. "The opportunity for scientific exchange at conferences and interaction with top-class researchers, as offered by PILLARS, have a lasting positive impact on the career opportunities of doctoral candidates in science", emphasizes Wiederhold. His doctoral candidate Christina Langer, for example, was able to complete research stays at renowned universities such as Harvard University or the University of Zurich. This allowed her to access exclusive data and initiate new projects from which her research has benefited in the long term: Her research work was picked up by the media, for example in the New York Times or Washington Post. Langer is convinced that this “would not have been possible without the time spent abroad and the associated opportunity for international networking”. In turn, Yuchen Go, also one of Wiederhold's project team members, was able to publish his research in the ifo Institute's EconPol Forum. This gives his work broad attention in the political and professional communities. "I very much appreciate that PILLARS researchers are allowed to publish their work in the renowned CESifo Working Paper series, one of the largest working paper series worldwide. This is otherwise reserved for CESifo members, most of whom are more advanced in their careers", says Go.

Exchange with international stakeholders

The multi-perspective approach of the project is not only guaranteed by the international orientation. A practical perspective is also included in the study: The team of researchers regularly meet with an international group of stakeholders that is made up of representatives from companies, trade unions and politics. They discuss their results in view of possible causes as well as their transferability to other contexts. Simon Wiederhold is convinced of the PILLARS project’s comprehensive approach: “This is research to my taste: Exciting new data, large data sets, relation to the practical field and an international perspective. It takes us away from small-scale evidence and allows us to understand developments that are not context-specific in a bigger picture.”

This primarily applies to the labor market, but also to consequences that are relevant for society as a whole. For example, Wiederhold’s team is looking into ways how to catch up on skill deficits through continuing education offers. For this purpose, the scientists collaborate with the Munich-based ifo Institute and make use of the PIAAC data, as this is the first time that information on digital skills worldwide has been collected in a comparable manner. As expected, the analysis shows that professional development and continuing education increases digital skills. But there were also surprising findings: In the digital field, the gain of professional development programs is lowest for employees that are older than 50. Wiederhold is currently investigating reasons for this: “It might be that those persons attend IT courses but cannot remember everything that was taught. But it might also be the case that those individuals are not even offered IT courses, but professional development programs on other topics, because their company is of the opinion that there is no real benefit in training older staff in how to use a new software.” If their research found proof that older staff members received significantly less continuing education offers in new technologies, Wiederhold would find that fatal: “When talking about digital skills, we are also talking about social participation. Exclusion of older people would therefore not only be a problem for the labor market.”



The PILLARS project is funded by the European Commission within the framework of the Horizon 2020 research and innovation funding program. The team of researchers includes experts from ten renowned partner institutions, amongst others in Germany, France, Italy, Great Britain, the Netherlands and China. In addition to economists, computer scientists and economic geographers also form part of the team. The individual partners collaborate in international and interdisciplinary teams. The KU, for example, cooperates with the ifo Institute and CRISP of the University of Milano-Bicocca. The project runs until December 2023.
Further information on the project at: https://www.h2020-pillars.eu