Report

Skills Gap in UK – Skill shortages in the economy is modest research finds

At the simplest level, skill mismatches refer to a failure of skill supply to meet skill demand. Mismatches, depending upon their intensity and scale, can be damaging: they can act as a drag on economic growth, limit the employment and earnings opportunities of individuals, and prevent companies maximising their performance.

The key findings from the study indicate the following.

  • At any single point in time,the incidence of skill shortages in the economy is modest. An experimental method has indicated the relatively short list of occupations where shortages are likely to exist. Many of these are skilled trade jobs.
  • Almost, at any point in time, shortage may account for no more than around 0.2 per cent of employment.
  • Employers are risk averse when they are looking to recruit people. If they are unable to recruit someone will all of the skills and attributes they are looking for, they would prefer not to recruit.
  • Instead they look to develop work-arounds but realize that these are not ideal and may be constraining their organisational performance.
  • Training more people is seen as a medium-to long-term solution in avoiding skill shortages, but employers have concerns about finding training that will meet their, sometimes narrow, job specifications, or being able to retain former trainees or apprentices once they have completed their training.
  • By being able to identify those occupations that are in shortage there is scope to target training in those occupations. In many cases this means Apprenticeships. The list of skill shortage occupations identified in this study are concentrated in skilled trades occupations where an Apprenticeship provides a typical means of entry.
  • Some employers were risk-averse when considering investing in more in training people via programmes such as Apprenticeships. They were worried about retaining staff they had trained. This may point to the need to reduce the amount of risk that employers face when considering investing in training programmes such as Apprenticeships.
  • The low level of shortages may reflect the fact that many employer shave product market strategies that are not dependent upon a highly skilled workforce. They are nestled in low value, low productivity segments of the market. If the product market ambitions of employers are raised, the demand for skills will rise accordingly.

Definitions

The main definitions of skill and skill mismatches are discussed in this chapter drawing on the existing literature in this area. In order to help with understanding the various concepts and to begin to assess the extent of skill mismatches in the UK, the main existing data are also provided for the various measures of skill shortages and surpluses (and skill gaps).

Indicators of skill typically relate to occupation, level of educational attainment, qualifications held and specific competencies (e.g. literacy, numeracy, IT). It is acknowledged that skill encompasses various dimensions which are difficult to define and measure in practice.

Skill mismatches refer to the imbalance between the supply of and the demand for skills, either in aggregate or within any particular occupation or sector.

Skill shortages can be considered according to the circumstances from which they arise, such as:

• where supply is less than demand in aggregate (i.e. an overall shortage of people with the skills sought in the labour market);
• where the supply of skills may be sufficient overall, but individuals with particular skills are not necessarily employed in the jobs requiring these skills (e.g. in particular sectors);
• where there is sufficient supply of skills but employers find other qualities lacking.

Skill surpluses refer to the situation where a worker’s skills are considered to be in excess of those required to carry out their current job or tasks which they are reasonably expected to fill within an organisation.

Commonly used measures of mismatch include the following (typically by occupation):

• employment and unemployment rates;
• relative wage levels and growth rates;
• occupational skill profiles; individual (employee) reports of the mismatch between their skills and job requirements; and,
• employer-reported recruitment difficulties related to skill mismatches and reports on skill gaps within their existing workforces.

On the basis of currently available data for a variety of these indicators of skill mismatch, the evidence suggests that there is a relatively modest level of shortages in the labour market. The assessment of individual indicators of potential mismatch presented in this chapter illustrates the need to consider a variety of dimensions and labour market indicators in order to get a better understanding of the nature and extent of skill mismatches.

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Chosen excerpts by Job Market Monitor. Read the whole story at Research to understand the extent, nature and impact of skills mismatches in the economy

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