Among the main challenges to the effective matching of the supply of and demand for skills on the labour markets in transition and developing economies are the weak capacities of employment services, underfunding of state-provided training services, slow reforms of education and vocational education and training (VET) systems, a relatively low level of in-house training by employers, and the existence of large informal economies combined with low levels of labour market attachment. There are also significant information gaps in many of the ETF partner countries, while there is also a greater need for information because of market uncertainty. Yet at the same time there is a lack of administrative capacity for skills analysis, forecasting and anticipation.

Different patterns of skills mismatch can be expected in developed, transition and developing countries. This is partly due to different patterns of structural change and partly associated with demographic factors. Countries with high rates of population growth may experience oversupply of educated school leavers; countries with ageing populations may experience undersupply of both skilled and unskilled workers. Migration of labour is a further conditioning factor. Internal migration changes the balance of skilled and unskilled labour supply in urban labour markets, while countries with a high rate of emigration of highly skilled workers (‘brain drain’) may experience significant shortages of skilled workers.