Skills Shortages in Industry

While it is reasonable to state that skills shortages are an inevitable part of any competitive market that doesn’t absolve stakeholders from making reasonable attempts to bridge the gaps. Intervention may be required when intolerable levels of unfiled vacancies are reached, or as a preventative measure for future growth and development. Any effort to alleviate skills gaps requires an accurate and thorough understanding of the factors that form the gaps in the current environment and an in depth exploration of possible solutions.

A common theme in recent writings on the topic of skills shortages is varying perceptions and ambiguities associated with the issue. Each of the key stakeholders is likely to perceive the issue differently and form different opinions on the current situation and future directions for the market to head in. Shah & Burke (2005) help us to understand the issue in more detail by breaking down each stakeholders’ perspectives; economists, who perceive skills shortages as a lack of qualified workers willing to work under current market conditions; employers, who may regard a shortage as recruitment difficulties; and unions, who may overstate skills shortages to increase overall wages, but may also be concerned with maintaining a level of staffing necessary to offer quality services. Of these three key groups perhaps the most integral to understand are the employers, who are often the key source of data concerning skills shortages, yet their opinion may be skewed more toward their own financial concerns. Shah & Burke argue that an employer may claim skills shortages in an environment of rising labour costs, where the employers may not be willing to hire workers under competitive wages because they may not perceive it as profitable. In 2004 two studies were completed to further examine skills gaps in manufacturing industries; The Australian Industry Group (AI Group) (2004) examined the nature and depth of skills shortages in Australia; Skinner, D., Saunders, M. & Beresford, R. (2004) examined differing perceptions of training and development needs in The United kingdom (UK).

According to AI Group (2004, p. 9) Australian firms agree upon the importance role of skill enhancement in business competitiveness, especially in a global competitive market, yet the effects of Shay and Burke’s alligations of employer perceptions may be seen in the UK manufacturing industry, which may be seen as perpetuating low skills by focusing on production of quantitative and not qualitative products (Skinner, D., Saunders, M. & Beresford, R., 2004, p. 184) thus posing detrimental effects to future economic growth. A lack of proper understanding of the issue is partly to blame, and a shift in organisational attitudes toward training would may, in the long term, aide the market.

Employers, whilst understanding the need for skilled staff, are reluctant to take on the necessary expenses of sustained training for existing and new staff. According to Skinner, D., Saunders, M. & Beresford, R. (2004) some organisations may be avoiding the cost of skilled workers by exercising unsavoury practices such practices as poaching staff, allowing staff to “muddle” through, making technological choices that deskill workers and shelving expansion plans. Employers may expect training and education of their employees to be the responsibility of the education system, rather than their own, thus limiting staff skilling within the organisation.

AI Group’s report surveyed 768 firms of 68,000 employees, representing about 25% of on industry activity. The study made some very simple and clear observations that would suggest Australia is experiencing a substantial skills shortage at present and therefore losing out on opportunities to strengthen itself in a global market. Over half of all organisations surveyed by AI Group were experiencing problems finding skilled workers. Given the time it takes to train tradespeople these skill shortages could not be addressed quickly. The most interesting aspect of the report lies in the analysis of employers’ actions taken to address shortages. Of the organisations surveyed 15% were going to take no action at all and around 60% were considering retraining existing staff.

Organisations expected to lift their apprenticeship intakes by 5% over 2 years, which will have very little effect on relieving the shortages. This low figure suggests that organisations may not be willing to invest in apprenticeship training, either because it doesn’t suit their needs or is too costly and time consuming. However Queensland, which is experiencing the most shortages, has responded by having the highest participation rate of apprentices, even distributed across most industries. The AI Group also found that student placements were common across organisations, and industries with the most student placements were those that tended to have the least skills gaps suggesting that student placements may help bridge the skills gaps over time. It is clear in the report that there needs to be a stronger relationship between education school and industry and education within industry.

Rather than focusing on facts and figures Skinner, D., Saunders, M. & Beresford, R. (2004) focused on the perceptions of key groups in UK automotive manufacturing industry; the policy makers and initiators, the policy implementers, and those affected. They managed to capture each of the stakeholders’ expectations by using a template process that enabled them to independently make explicit their ideas and interests. Groups were represented by 2 main factions; the providers, educators preparing for entry into industry; and the consumers, employers.

The product of the template-based study demonstrates the sometimes conflicting opinions of educators, students and employers. Skinner, D., Saunders, M. & Beresford, R. (2004) do present the information using charts and tables, but rather explain each perspective, partly due to the nature of their study not aiming to draw distinct distinctions between the perceptions and partly to allow readers to build their own conclusions on the data – though it is tempting to consider constructing a table of their findings. It is interesting to compare what the stakeholders see as critical skills and how infrequently these ideals overlap.

Important differences that arise include the perceptions of lecturers and students in further (FE) and higher education (HE). FE lecturers placed importance on transferable, or ‘soft’, skills, in-line with employers’ expectations, whereas students placed emphasis on specialist technical skills. Skills ranked highly by HE students didn’t rank on HE lecturer’s templates despite HE students being closer to employer’s expectations than their lecturers. A significant gap occurs in employer’s expectations of mathematical skills that were ranked far higher than lecturer’s. Differences in the expected and perceived skills levels were also highlighted by the report – most noticeably those of literacy.

The report stops short of suggesting that industry skills gaps would be any less prevalent should educators take on board all the recommendations of company groups. Indeed the report states the VET has difficulty even communicating its wants into anything operational. Further study using the template system may help future industry growth since VET in the UK has always been focused on the supply side, rather than the demand side. Gaps would be better bridged based on knowledge rather than assumptions where there are clear differences among stakeholders.

Considering the large numbers of forces influencing gaps, and severity and extent in each market, a wide range of options may be considered in devising a response to bring balance. Shah & Burke (2005) articulate the varied opinions of stakeholders and consider possible public policy responses to lessen the problem. A clear understanding of the factors, as pointed out by Skinner, D., Saunders, M. & Beresford, R. (2004), is seen as an important factor by Shah & Burke (2004) when considering policy response. Their paper also adds that care should be taken when interpreting employer-based surveys due to the aforementioned varied meanings associated to skills shortages.

Publicly funded training, such as that provided by the Priority Education and Training Program (PETP), is seen as viable since skills shortages negatively affect economic development, though it may not be the best first option since Government intervention may be counter productive if the market is already making steps toward correcting itself. However government may be able to provide ongoing support to in the form of transparency of labour market information. Since information is expensive it is not likely that a free market would provide quality and useful information, though the extent of government’s usefulness here is also dubious since after a point they are diminishing returns on the investment.

Perhaps the most promising response is to encourage training in industry – which was presented as a potential solution by AI Groups (2004), Skinner, D., Saunders, M. & Beresford, R. (2004) and Shah & Burke (2005). If organisations took greater responsibility for the their own training then employee skills gaps could be addressed more quick and efficiently than current practices may allow. This would require a shift in employers’ mindsets to see training as an investment, rather than a cost.

Current writings suggest that in the formation of policy responses to balance skills shortages there are several key areas that need to be improved on. Changes to employers’ perceptions on the expenditure of training will help bridge gaps, rather than relying on delayed and mismatched responses from educational institutions. Of greater importance is the need for unambiguous understandings of the terms associated to skills shortages across all stakeholders is critical for effective communications between each other. Following this may be increased accessibility to accurate and up to date data on current markets imbalances so that policy makers can be well informed when making decisions for future directions.

References

Australian Industry Group (2004) Australia’s skills gap costly, wasteful and widespread: a report on the nature and depth of skills shortages in manufacturing’. Retrieved 1st September, 2007, from http://www.airc.gov.au/snr2005/aig/AiGsub2005_Annex4.pdf#search=”Australia’s skills gap costly, wasteful and widespread”

DIIRD (2007) Priority Education and Training Program. Retrieved September 8th, 2007, from http://gftp.otte.vic.gov.au/gftp/PETP/index.asp

Shah, C. and Burke, G., (2005) Skills shortages: concepts, measurement and policy responses. Australian Bulletin of Labour [Electronic version], 31(1), 44-71.

Skinner, D., Saunders, M. & Beresford, R., (2004) Towards a shared understanding of skill shortages: differing perceptions of training and development needs. Education and Training [Electronic version], 46(4), 182-193.