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Skill Shortages in the UK

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SKILL SHORTAGES IN THE UK
ISSUES, PROBLEMS AND
WAYS FORWARD
Ewart Keep
Deputy Director,
ESRC Centre on Skills, Knowledge &
Organisational Performance,
University of Warwick,
Coventry, CV4 7AL,
ENGLAND
E-Mail: skopeek@wbs.ac.uk
INTRODUCTION
Skill Shortages and public policy �Moral Panic’ about VET
Two Dimensions to Skills Shortages:
 Employers’ difficulty in obtaining skills they need
 International comparisons of stocks of skills
The importance of defining what the problem really is
The changing meaning of skills
The UK’s threefold policy response on skills:
 Boost publicly-funded VET
 Targets
 Forecasting, planning and matching
Deeper tensions
The dawn of a new approach – skills and what else…?
UK VET AND MORAL PANIC IN
PUBLIC POLICY
Skills as THE key to national competitiveness
Skills as THE key to performance at firm level
Skills as THE key to a host of problems:
 Unemployment and social inclusion
 Lack of strong sense of citizenship
 Poverty and welfare dependency
 Crime and drug abuse
 Anti-social behaviour
The current wave of UK concern started in 1976 and is
ongoing.
Bound up with visions of the Knowledge Driven Economy
AND IN THE USA TOO
“The surge of global competition into our labor
markets, sweeping technological change, and
impending shifts in the demographic mix of our
labor force call for a national campaign to improve
the skills and professionalism of the American
workforce. We must create new learning
partnerships throughout our communities and
workplaces to sustain the jobs that provide for our
middle class, pay the social costs of health,
education and retirement, and preserve
capabilities necessary for our nation’s security”.
Task Force on Workforce Development, Albert Shanker Institute/New
Economy Information Service, Learning Partnerships:Strengthening
American Jobs In the Global Economy, 2004:2
SKILL SHORTAGES
TWO REASONS TO WORRY
1. Skill �shortages’ as defined by international
�league tables’. Here the focus of concern is that
other countries appear to have workforces with a
higher stock of skills (qualifications) than your
own. The �shortage’ is comparative.
2. Skills �shortages’ as defined by employers who
cannot recruit to fill vacancies (or who have
concerns about the skills of their existing
workforce).
In the UK these two definitions have interacted to
fuel public policy concern about skills supply and
the operation of the VET system.
EMPLOYERS’ SKILL SHORTAGES
UK EXPERIENCES
 New Labour come to power in 1997 and start to
worry about an over-heating economy and skill
shortages as a cause of inflation and a block on
productivity improvement.
 The National Skills Task Force (NSTF) is
appointed to investigate the scale and nature of
the problem and to recommend what might be
done.
 The NSTF was made up of VET supply managers,
employers, trade unions, with a secretariat from
government. It commissioned a large programme
of research.
DEFINE YOUR PROBLEM
The NSTF swiftly concluded that vague and loose
terminology made it very hard to categorise the nature and
discern the scale of the problems that underlay the
reported skill shortages.
Their solution was to divide the problem into three different
categories:
EXTERNAL RECRUITMENT PROBLEMS
– Hard to Fill Vacancies (HtFVs)
– Skill Shortage Vacancies (SSVs)
INTERNAL PROBLEMS
– Skill Gaps
Clearer definition was seen as the key to better targeted
public policy interventions. Diagnose the problem
accurately and then select an appropriate cure.
AND THESE MEAN?



Hard to Fill Vacancies are vacancies reported
by employers to be hard to fill.
Where HtFVs are due to a shortage of applicants
with the required experience, qualifications or
skills, they are regarded as Skill Shortage
Vacancies.
Skill gaps are defined as occurring when
employers regard some of their staff as not being
fully proficient to meet the requirements of their
job.
These definitions now operate within the UK’s four
national VET systems and determine how data is
collected and policy responses are formulated.
CLOSER DEFINTION OF THE
PROBLEM MEANS THE
PROBLEM DIMINISHES SHARPLY
The NSTF’s work paid off. Once the new definitions were
applied at a stroke about 80 per cent of the �skill shortages’
within recruitment vanished.
Using large-scale surveys (the 2004 National Employer
Skill Survey covering England had a sample of 70,000 plus
establishments), we now have a very accurate picture of
HtFVs, SSVs and skill gaps, by:




Sector
Region
Locality
Occupation
THE PICTURE IN 2004
At the time of the survey:
 14% of establishments had vacancies
 8% of establishments had HtFVs
 4% of establishments had SSVs
 Number of vacancies – 766,000
 Number of HtFVs – 358,000
 Number of SSVs – 159,000
 HtFVs as a % of employment were 3.7%
 HtFVs as a % of vacancies were 47%
 SSVs as a % of employment – 0.8%
 SSVs as a % of vacancies – 21%
NESS 2004 CONTINUED
Skill Gaps
 % of establishments with skill gaps – 23%
 Skill gaps as % of employment – 9%
Most skill gaps are transitory. They are
caused by the arrival of new workers, who
need training.
Between 2001 and 2004,
The level of SSVs stayed static.
HtFVs increased by over 50%
Table A: Density of Recruitment
Problems by Occupation
Vacancies
Vacancies as
%employment in
occupation
HtFVs as %age of
all vacancies
SSVs as %age of
all vacancies
Managers
35,237
1.3
34.5
18.2
Professionals
51,835
1.7
37.1
24.3
Associate
Professionals
81,142
4.4
38.8
23.6
Admin. &
Secretarial
84,010
2.9
23.2
11.1
Skilled Trades
63,391
3.3
62.5
39
Personal
Services
74,169
6.1
51.4
23.7
116,662
3.4
32
12.4
57,740
3.4
50.3
27
Elementary
Occupations
107,393
3.5
40.3
14
All Occupations
679,072
3.1
40
19.9
Sales, Customer
Service
Operatives
Source: IFF/IER National Employers Skills Survey, 2003 (LSC 2004)
Base: Employee-Weighted
Skill Shortages as %age of Vacancies
GAPS MAY BE A GOOD SIGN
Research (Mason, Zwick) suggests that skill gaps are
associated with organisations that are seeking to:
 improve their productivity
 expand their product range
 upgrade product or service quality
 introduce new equipment (e.g. ICT)
 develop new markets
An economy with few skill gaps may be an economy with a
lot of path dependent firms who are not responding to
competitive pressures very well.
As long as the gaps are transitory, they are probably a
good sign.
THE CHANGING MEANING OF SKILL
A RISE OF GENERIC & SOFT SKILLS
 Survey and case study data suggests that many SSVs
occur because of problems with soft/interpersonal and
generic skills. This is particularly so in the service sector.
 There are many facets to this development as they impact
on the ability of the VET system to respond:
 Rise of generic skills, such as problem solving. Some of
these generic skills may be less generic than assumed.
Also the issue of where they are best created – education
or the workplace in which they will be applied.
 Rise of personal attributes (self-discipline, loyalty,
punctuality, motivation) which may not be skills per se, and
which may reflect employee relations conditions in the
workplace.
 Rise of aesthetic labour – looking right and sounding right!
SOFT AND GENERIC SKILLS
FURTHER CHALLENGES FOR VET
 Challenges for certification systems in the UK,
where the demands of �rigorous’ public
examination mean that soft key skills go
uncertified.
 Aesthetic skills are not traditionally part of VET.
They pose a large challenge. Ensuring that
candidates present themselves for interview in an
hotel or fashion boutique as being, “passionate,
stylish, confident, tasty, clever, successful and
well-travelled” (Warhurst and Nixon, 2001) is
tricky.
 Quite a lot of these new skills appear to be proxies
for middleclassness.
HOW HAS POLICY TRIED TO RESPOND
ON LABOUR SHORTAGES AND HtFVs?
Boosting already relatively high participation in
employment:
– Return to work for those on disability benefit
– New Deals for the long-term unemployed
– In work tax breaks to make low paid work �pay’
– Migrant labour (especially from New EU states)
– Illegal immigrants – Treasury not too worried
TENSIONS:
– Department for Work and Pensions – “work first, any
work’
– Department for Trade Industry – some jobs may not be
worth having
LABOUR FLOW DIAGRAM
The Labour Market
The
Educatio
n System
5% �Blue Chip’ jobs
20% Professional/
Managerial
10% Associate Professional
15% Craft/Technician
35% Clerical/Retail/
Production
15% Awful Jobs
HOW HAS POLICY TRIED TO
RESPOND ON SKILL?
Given:
 Beliefs about the role of skills in international
competitiveness
 International comparisons of skill stocks that showed the
UK in a poor comparative light at some skill levels.
 Modest levels of skills shortages and gaps in the economy
How have the four UK national governments driven policy on
skill?
ANSWER: A threefold policy response on skills:
 Boost publicly-funded VET
 Targets
 Forecasting, planning and matching
England is the most extreme example of planning,
Scotland of spending and supply.
BOOSTING SUPPLY TO MATCH
OVERSEAS COMPETITORS
Over the last 25 years England has:
 Massively expanded post-compulsory participation among
the 16-19 age-group.
 Massively expanded its higher education system
 Increased government support for employer training,
through apprenticeships and now through schemes for
adult workforce.
 Created a state of permanent revolution in the institutional
structures that control, manage, fund, inspect and deliver
VET.
 Centralised the control of the VET system in the hands of
central government and its agencies.
WEAKNESSES REMAIN
 Relatively low participation post-17.
Reflects structure of youth labour market
and labour market regulation (e.g. licence to
practice).
 Adult literacy and numeracy (basic skills)
problem are quite extensive.
TARGETS FOR EVERYTHING
- NOT A HAPPY STORY
 The English VET system is now managed via a range of
national targets. Some are set by central government,
others by the Learning and Skills Council (LSC).
 The central government Public Service Agreement (PSA)
targets are set without any consultation with external
actors or users of the Vet system.
 The LSC’s National Learning Targets (NLTs) are
supposed to have secured buy-in from employers and
others.
 The PSA targets over-ride the NLTs in terms of priority
for funding and other public resources.
 It is far from clear that the PSA targets relate in any way
to future projections of need for skills or qualifications.
They appear to be driven (as are the NLTs) by
international comparisons of skill stocks.
PROBLEMS WITH THE NLTs
The NLTs are supposed to be �minimum international
benchmark standards’ that must be met to ensure
economic success. The NLTs have a long history of failure:
 Of the 8 targets set by the Confederation of British
Industry in 1991 for achievement in 1997, just 2 were
met.
 Of the 6 targets set by NACETT in 1994 for
achievement in 2000, only 1 was met.
 Of NACETT’s second set of 4 targets to be achieved in
2002, only 1 was met.
 Of the 5 NLTs set by the LSC for achievement in 2004,
only 1 was met in full, despite the fact that the 2004
NLTs were less ambitious than those set by NACETT for
achievement in 2000.
 No new NLTs have yet been set.
AN EXAMPLE OF TARGET
VERSUS NEED
One of the government’s key VET targets is one set by the
Prime Minister himself – that England achieve 50%
participation in HE by the 18-30 cohort.
This target was established without reference to need in
the economy for graduate level skills.
Given achievement patterns in England, this means that
the vast bulk of those with intermediate level qualifications,
academic and vocational, need to enter HE to meet the
target.
Sectors like engineering, that still need substantial
numbers of young people to train as apprentices and
technicians, and to fill intermediate level skill jobs, are
faced with the prospect of big skill shortages. Employers
complain the target is dangerous.
RE-ENTER THE DRAGON:
THE RETURN OF �MANPOWER
PLANNING’ (BIGGER, BOLDER AND
MORE POINTLESS THAN EVER)
�Manpower planning’ was very briefly and mildly in vogue in the mid to
late 1970s. Thereafter the fashion was for a training market.
In 1999/2000 some members of the NSTF decided that the best way to
avoid skills shortages was to establish an elaborate system that linked:
 Labour market forecasting (based on economic modelling)
 Employers’ views about future skill needs
 Funding of the VET system
The Learning and Skills Council (LSC) was set up to do this. Its
mission was to engage in �manpower planning’ on a grand scale, and
at a high level of detail.
The aim is to match supply with demand.
TOP DOWN, BOTTOM UP, AND
SIDEWAYS
Besides the LSC, there are many other
players in the new system:
 9 Regional Development Agencies (RDAs)
 30 Sector Skills Councils
 Sector Skills Development Agency (covers sectors
with no SSC for planning purposes)
And it operates at sectoral and regional
levels as well.
WILL THEY ALL MEET IN THE
MIDDLE?
 Treasury/DfES PSA targets
 National LSC plan and targets
 47 LLSCs plans and targets
 9 RDA Regional Economic Strategies (RES), which then
plan the skills component via 9 Regional Skills
Partnerships (RSPs). These include input from the SSCs
and the relevant LLSCs.
 30 SSCs, (plus SSDA) each producing over the coming
years its Sector Skills Agreement (SSA), which project
sectoral needs and to which public funding of VET is meant
to be tied.
Are all these plans liable to meet up in the middle? Early
indications suggest contests for scarce resources –
talented people and the money to train them.
PROBLEMS WITH PLANNING
Planning is only as good as the data being entered.
UK employers have no history of, or capacity for planning
in detail within their own companies. Projected employer
views on skill demand are guesses.
Most projections rely on modelling of changing sectoral
and occupational structures and sizes.
Industry data is weak because:
 It does not take account of outsourcing
 Industry structures are changing rapidly
 Multi-nationals add complexity
Occupational data is weak because:
 Occupations are getting fuzzy
 Many skills are now cross-sectoral
 Measures job numbers not earnings
 Job/occupation titles now cover a wide range of skill levels
(e.g. �manager’)
MORE PROBLEMS WITH
PLANNING
 Generic and soft skills are not covered very well
by UK qualifications, so much skill demand in the
service sector cannot be specified and planned for
by recourse to qualifications. Within publiclyfunded VET, funding is normally dependent on the
delivery of whole, officially approved qualifications.
 Lead times are lengthy. Setting up new provision
and putting students through it at intermediate and
higher skill levels means a 3 to 4 year lag.
 Economic volatility (in the whole economy and
sectors) can throw plans out very quickly.
EVEN MORE PROBLEMS WITH
PLANNING
The matching model assumes:
1. Simple, linear one-off career choice, which research
suggests this does not happen
2. Supply and demand can be kept in balance without a clash
of interests. An appropriate number of prospective
students, not too few, not too many, can be persuaded to
opt for a given course in a given locality. The examples of
media studies and hairdressing. A problem for the LSC,
which is supposed to be:
 Student-centred
BUT
 Employer-led
3. Employers want supply to match demand. They don’t.
They rationally want an excess of supply, it drives down
wages and it gives them choice when recruiting.
DEEPER TENSIONS
In a voluntary system, how do you get employers to play
their part, and how do the various players decide exactly
what their part is?
It would be a mistake to treat the current
demands of employers and individuals for
skills as coterminous with the needs of the
economy….it cannot be assumed that these
(employer and individual demand) necessarily
reflect the wider needs of the economy for
economic growth and stability
National Skills Task Force, 1998: 3.
Whilst we accept that a greater proportion of
people with full vocational qualifications may
benefit the economy as a whole, this is not the
main concern of individual companies.
British Chamber of Commerce 1998
Problem identified, but what to do about it?
THE NEEDS OF EMPLOYERS
EQUAL NEEDS OF EMPLOYMENT
The UK is unusual, at least in a European context,
in choosing to define the needs of the labour
market solely in terms of the needs of employers.
In other countries the norm is for social
partnership arrangements, and the active
involvement of worker representatives in the
management of the VET system, to ensure that
such needs are conceptualised in terms of the
wider needs of employment and employability
rather than the immediate skill requirements of
employers alone.
VOLUNTARY BUT CLOSELY
PLANNED - MATCHING SUPPLY
WITH DEMAND IS HARD
 Interests and needs of different players do not
coincide.
 One person’s demand is different from another’s
demand.
 Employers are in competition for certain types of
talent. If one lot win, another lot lose (and
complain)
 Individuals want different outcomes from
employers (e.g. broader qualifications)
 The LSC and others are left to try and mediate.
Squaring the Triangles


Employers
Individual
 Learner

Needs of
Society/Eco
nomy
Qualifications Demand & Supply 2001
DD: Highest Qualification
Required (�000s of jobs)
SS: Highest Qualification
Held (�000s of jobs)
Level 4 or Above
7,122
7,359
Degree
Non-Degree
4,220
2,903
4,774
2,585
Level 3
3.976
6,379
Level 2
3,878
5,302
Level 1
2,951
3,549
No Qualifications
6,464
2,881
Percentages of �Over-qualified’ &
�Under-qualified’ - 1986-2001
1986
1992
1997
2001
The UnderQualified
20.5
16.5
19.8
17.6
The OverQualified
30.0
31.2
33.0
37.0
Level 4 plus
Degree
Non-Degree
27.9
30.2
32.1
25.3
29.7
28.4
25.8
31.6
29.8
28.0
33.9
33.9
Level 3
47.7
41.5
52.0
48.1
Level 2
42.4
42.7
40.8
50.0
Level 1
54.3
48.9
42.5
43.2
NB: An under-qualified individual has a highest qualification at a lower level than that currently required to get the
job he/she now holds
An over-qualified individual has a qualification at a higher level than that currently required to get
the job he/she now holds.
PROBLEMS WITH DEMAND
FOR SKILLS
There has been a gradual dawning that, in part, our relatively low levels
of VET vis-Г -vis other developed nations may reflect the fact that
demand for skill in the UK economy is relatively limited.
 Finegold, Soskice and the Low Skills Equilibrium
 Mason and Low Skills Trajectories
 Significant parts of the economy appear locked in to producing
relatively low specification, lower quality goods and services
that do not require high levels of skill to deliver them.
 Hogarth and Wilson and the DTI study
 SKOPE and the Employers’ Perspectives Survey
RESEARCH CONCLUSION: higher product or service
specification/quality is positively associated with the need for higher
levels of skill. The link is not always simple and direct, and may impact
on different parts of workforce with varying force.
PROBLEMS WITH SKILL USAGE
Two main issues:
 Gradually rising levels of over-qualification
 Slow (now stalled), and very patchy spread of
High Performance Work Organisation (HPWO),
high involvement work practices, etc. Work
organisation and job design is often impoverished,
produces many highly routines jobs and limits the
discretion, creativity and ability to utilise skill of
much of the workforce.
SKILLS ALONE ARE NOT
ENOUGH
Realisation that although skills are important, and
supplying more of them is a prerequisite for progress,
skills produce results in combination with other factors.
Thus recent thinking on the UK’s patchy record on
productivity now acknowledges that there are other
weaknesses that must be tackled:
 Poor record on R&D
 Very poor record on investment in plant and
equipment over many decades
 Low levels of innovation
 Poor public infrastructure (e.g. transport)
The challenge covers the need to move to a
new model of competitive advantage.
THE PORTER REPORT
Michael Porter and colleagues were
commissioned to report on the health of the UK
economy. They concluded:
The UK currently faces a transition to a new phase
of economic development. The old approach to
economic development is reaching the limits of its
effectiveness, and government, companies and
other institutions need to rethink their policy
priorities…..We find the competitiveness agenda
facing UK leaders in government and business
reflects the challenges of moving from a location
competing on relatively low costs of doing business
to a location competing on unique value and
innovation.
(Porter and Ketels, 2003: 5)
THE PIU WORKFORCE
DEVELOPMENT PROJECT
The Prime Minister commissioned the Cabinet Office’s Performance
and Innovation Unit (PIU) to undertake a follow-up to the NSTF.
Its aim was to address some of the fundamental issues left
hanging by the NSTF.
The PIU’s inquiry reached conclusions that changed the fundamental
direction of VET policy. It argued that:
 Weak demand for skill was as much a problem as poor supply.
 Besides possible market failure, there was also systems failure
underpinning a partial Low Skills Equilibrium in the economy.
 Skills are a derived demand – derived from and driven by
business need. The key for policy was to impact on business
strategy:
Workforce development needs to be addressed
in the wider context of government and business
strategies towards product strategy, innovation,
market positioning, IT, human resources policies
and so on.
A DAWNING REALISATION THAT
SKILLS ARE THE EASY BIT……..
THE BAD NEWS IS: up-skilling is the easy bit.
If a government is willing to spend taxpayers’
money on a large enough scale, a much more
highly qualified workforce is achievable, as the UK
has proved.
Deriving benefit from this is the hard part.
Ensuring that higher levels of skill are really
needed and get used to maximum productive
effect is the new challenge. One for which AngloSaxon style public policy is poorly prepared.
�SKILLS CRISIS’ AS A RHETORICAL
DEVICE IS STARTING TO LOOK TIRED
 Skills shortages are modest and concentrated in
certain sectors and occupations
 Skills gaps are mainly transitory
 Over, not under, qualification is becoming a
problem
 Massive increases in skill supply have not �solved’
our problems with relatively low levels of
productivity.
Increasingly, the question for policy makers is:
Skills in combination with what else, makes the
difference?
SKILLS AND WHAT ELSE MAKE
THE DIFFERENCE?
 Highly sophisticated and demanding customers (at home & overseas)
with income levels that allow them to purchase high spec, high valueadded goods and services.
 High levels of R&D (public and private) and innovation
 Investment in new technology, plant and communications
 Patient and knowledgeable capital
 Legal, social and cultural infrastructure that encourage networking
between firms
 High levels of social cohesion and stability
 An efficient, responsive and adequately resourced skills supply system
in which ability and achievement, rather than social background and
mode and place of study determine labour market outcomes.
 An open and efficient labour market
 High performance workplaces, competing on the basis of quality,
paying high wages and offering as much job security as possible,
within which employee relations systems and practices encourage
partnership, high trust relationships and skills development.
THIS SETS THE SCALE OF CHALLENGE FOR PUBLIC POLICY
FINAL THOUGHTS
 The foregoing does not mean we can
neglect our skills supply system, but it
does mean that it is now pointless to
pretend that supplying more skills will, of
itself, solve our economic and social
problems.
 Policy needs to embrace the supply,
demand and usage of skill if it is to make
further progress.
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