SKILL%20SHORTAGES%20IN%20THE%20UK%20ISSUES,%20PROBLEMS%20AND%20WAYS%20FORWARD

1
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_at_wbs.ac.uk

2
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 UKs 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?

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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

4
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 nations
  security.
• Task Force on Workforce Development, Albert
  Shanker Institute/New Economy Information
  Service, Learning PartnershipsStrengthening
  American Jobs In the Global Economy, 20042

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SKILL SHORTAGESTWO REASONS TO WORRY

• 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.
• 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.

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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.

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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.

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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 UKs
  four national VET systems and determine how data
  is collected and policy responses are formulated.

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CLOSER DEFINTION OF THE PROBLEM MEANS THE PROBLEM
DIMINISHES SHARPLY

• The NSTFs 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

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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

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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

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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
Sales, Customer Service 116,662 3.4 32 12.4
Operatives 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
Source IFF/IER National Employers Skills Survey,
2003 (LSC 2004) Base Employee-Weighted
13
Skill Shortages as age of Vacancies
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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.

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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!

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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.

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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

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LABOUR FLOW DIAGRAM

• The Labour Market
• 5 Blue Chip jobs
• 20 Professional/ Managerial
• 10 Associate Professional
• 15 Craft/Technician
• 35 Clerical/Retail/ Production
• 15 Awful Jobs

The Education System
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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.

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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.

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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.

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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 LSCs 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.

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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 NACETTs 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.

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AN EXAMPLE OF TARGET VERSUS NEED

• One of the governments 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.

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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.

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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.

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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.

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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)

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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
  publicly-funded 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.

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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
  dont. They rationally want an excess of supply,
  it drives down wages and it gives them choice
  when recruiting.

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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?

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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.

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VOLUNTARY BUT CLOSELY PLANNED - MATCHING SUPPLY
WITH DEMAND IS HARD

• Interests and needs of different players do not
  coincide.
• One persons demand is different from anothers
  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.

34
Squaring the Triangles
35
Qualifications Demand Supply 2001
DD Highest Qualification Required (000s of jobs) SS Highest Qualification Held (000s of jobs)
Level 4 or Above Degree Non-Degree 7,122 4,220 2,903 7,359 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
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Percentages of Over-qualified
Under-qualified - 1986-2001
1986 1992 1997 2001
The Under-Qualified 20.5 16.5 19.8 17.6
The Over-Qualified 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.
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PROBLEMS WITH DEMAND FOR SKILLS

• There has been a gradual dawning that, in part,
  our relatively low levels of VET vis-à-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.

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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.

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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 UKs patchy record
  on productivity now acknowledges that there are
  other weaknesses that must be tackled
• Poor record on RD
• 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.

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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)

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THE PIU WORKFORCE DEVELOPMENT PROJECT

• The Prime Minister commissioned the Cabinet
  Offices 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 PIUs 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.

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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 Anglo-Saxon
  style public policy is poorly prepared.

43
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?

44
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 value-added
  goods and services.
• High levels of RD (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

45
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.