Significant labour market mismatches and insufficient mobility penalise employment and productivity.
Mismatches have above all a skills dimension, with an excess of low-skilled workers and a possible lack of
skilled workers in certain domains. Reducing the high tax wedge on low salaries and avoiding excessive
minimum wage increases would support demand for low-skilled labour. In the longer term, upgrading the
labour supply requires improving educational outcomes, especially of disadvantaged students, and making
the school-to-work transition less abrupt. To facilitate good matching and enhance sectoral mobility, a
somewhat longer duration of unemployment benefits and an upscaled Public Employment Service would be
of value, as well as greater focus on reintegration in the public works programme and more efficient and
developed lifelong learning. Besides skills mismatches, important geographic mismatches are illustrated by
high and persistent regional disparities in the unemployment rate. Mobility is hampered by the
underdevelopment of the rental housing market, while there is room to enhance the efficiency of public
transport to further support commuting.
