Mismatch in the 21st century: An overview

Technological change, demographic pressures, and the green transition are reshaping labor markets, highlighting the importance of understanding how workers’ skills align with job requirements. This paper surveys the theoretical and empirical literature on worker-job mismatch, focusing on skill mismatch and distinguishing it from related concepts including hiring difficulties, sectoral mismatch unemployment, and broader allocative inefficiency. We discuss the forms that mismatch can take in the labor market and review their empirical measures. Recent contributions highlight the importance of multidimensional skills and the potential of employer-employee data and machine-learning methods to measure mismatch when direct skill information is unavailable. We then review the main theoretical mechanisms through which mismatch arises, emphasizing search frictions and imperfect information and learning. We also survey evidence on the determinants of mismatch, including labor-market institutions, financial constraints, geography, managerial practices, technological change, and migration, and on its consequences for wages, career outcomes, productivity, and employment. Finally, we discuss policies to reduce mismatch and identify open questions for future research.