Poster #81 - From Skills to Job: A Multi-Group SEM of Employment Outcomes across Welfare Regimes

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Abstract

Introduction 
While education and cognitive skills are widely viewed as primary drivers of employment outcomes, skill possession alone does not guarantee labor market success. Growing evidence on skill mismatch and job polarization suggests that whether skills are effectively utilized at work matters as well. Yet most policy approaches continue to prioritize skill acquisition, overlooking the role of workplace conditions in enabling skill use. This study examines how education and cognitive skills translate into employment outcomes through workplace skill use, and how these relationships vary across welfare regimes. We propose that welfare regimes do not merely influence skill formation; they actively moderate how individual human capital and workplace skill use convert into labor market returns, with direct implications for the design of context-sensitive labor market policies.  
Data & Research Design 
Using data from the second cycle of the Programme for the International Assessment of Adult Competencies (PIAAC, 2022–2023; N = 50,992), this study analyzes adults aged 16–65 across 13 countries. Key constructs include latent measures of cognitive skills (literacy, numeracy, problem solving) and workplace skill use (technology, reading, writing, numeracy). Employment outcomes are measured by monthly earnings and employment quality. Structural equation modeling (SEM) is used to estimate direct and mediated relationships among education, skill, skill-use and employment outcomes. Multi-group SEM is applied to compare patterns across four welfare regimes: Social Democratic, Liberal, Corporatist, and East Asian.
Results
Results indicate that workplace skill use is the most consistent and substantial predictor of employment quality across all regimes, with strong mediating effects linking cognitive skills to earnings and employment quality. In contrast, cognitive skills exhibit only modest direct associations with earnings, suggesting that skill possession alone is insufficient without opportunities for application. Multi-group comparisons reveal significant cross-regime variation in these pathways. Direct returns to education are strongest in Liberal and East Asian regimes, consistent with credential-based labor market signaling, while the returns to workplace skill use are most pronounced in Corporatist regimes, where institutional arrangements appear to better support the translation of skills into productive work. These cross-regime differences suggest that the skill-to-employment pathway is contingent on the broader institutional environment workers operate in.
Implications
These findings challenge conventional human capital assumptions that increasing skill levels alone will improve labor market outcomes. Instead, they highlight the central role of workplace conditions and job design in enabling skill utilization. From a policy perspective, interventions focused solely on skill acquisition may be insufficient—and in some contexts, misaligned with the institutional realities workers face. Greater attention should be paid to job quality, job-worker matching, and institutional environments that support effective skill use. By integrating individual-level mechanisms with cross-national institutional differences, this study contributes to a more nuanced understanding of how skills are converted into labor market returns through workplace utilization, and how institutional arrangements embedded in welfare regimes shape these conversion processes, underscoring the need to align skill development policies with broader institutional contexts.

Author

• Wei-Cheng Liu, University of Illinois
  Presenting Author