Skill Shortages, Skill Gaps, and Labor Demand

The focus in this chapter is on the consequences of employers’ decisions and on labor market institutions that create flexible, rigid, or segmented labor markets. The authors profile how each of the focal countries maintains culturally distinctive production functions and how these approaches to the creation of goods and services impact employment and overall economic performance. The importance of a labor market designed around the production of value-added product for export is highlighted, as is the pressure it places on renewal of knowledge and skill sets and flexible labor markets. Failures of the labor market in the forms of unemployment, underemployment, and low labor force participation have resulted in a variety of government interventions or active labor market policies. The authors examine the effectiveness of a number of these policies, including subsidies paid to employees, minimum wages, and employment subsidies to private businesses and public sector jobs.