Mark Stuart is Professor of Human Resources and Employee Relations at Leeds University Business School in the UK. He has held various positions at Leeds University, starting from 1992, and has also held visiting positions at the National Centre for Vocational Education Research, Adelaide, Australia and Monash University, Melbourne, Australia. He is currently leading a three year evaluation of the Department of Trade and Industry’s Trade Union Modernisation Fund.

Professor Stuart has been widely published in leading human resource management and industrial relations journals, including the British Journal of Industrial Relations, Industrial Relations Journal, International Journal of Human Resource Management, Human Resource Management Journal, Economic and Industrial Democracy and Work, Employment and Society. He is an editorial board member of the International Journal of Training Research and Work, Employment and Society and an Associate Member of the ESRC Centre for Skills, Knowledge and Organisational Performance.

Concern over skills shortages is nothing new. In the UK, debate over skills has ebbed and flowed in response to changing economic conditions. For example, in the late 1980s there was massive discussion around skills shortages, as policy makers and practitioners forecast major competitive constraints on firms in relation to an impending ‘demographic time bomb’. Some of this concern was well founded, as were calls for employers to look at new scenarios for workplace hiring and labour utilisation, such as greater use of older workers. But much of the panic was countered by the recession of the early 1990s.

There is something of a pattern, in other words, to historical debates around skills shortages: they become an issue when the economy is on the up, and abate when the economic cycle turns downwards. One problem with this is that contemporary concern over skills shortages often overlooks more fundamental problems about UK training policy, skills utilisation and demand: how much investment should be made in skills training; how should the new skills be used at work; and what kind of long term planning needs to be considered.

 
So, is the current debate around skills shortages any different? In some respects not! We have been here before many times. But this is not to say that firms are not experiencing real skills problems and shortages. There are, however, important questions around what exactly we mean by ‘shortage’ and also, of course, what we mean by ‘skill’. At the most simple level, a skill shortage can refer to a difficulty in filling advertised positions. Care must be taken however in how we interpret this and what it means in terms of weaknesses in the UK skills base; particularly if demands for policy intervention are to be made on the back of this argument. Recruitment difficulties are often taken to mean that major problems exist in relation to the supply of skills in the UK economy. Often however this analysis is flawed in at least two important respects.

First, in terms of supply, it is taken to mean that workers do not have the requisite qualifications, when in reality what is meant by a skill in this context is something more amorphous. Evidence shows that the
number of qualifications obtained by the British workforce has increased significantly in recent years: at the same time as reported skills shortages have increased. In simple terms, the recruitment difficulties are not related to a lack of qualified workers. Rather, employers are looking more for workers that can ‘fit’ with the firm, and have the requisite social and behavioural skills to do this. Researchers long ago referred to this as the ‘good bloke syndrome’. More recently, it can be seen in the call from the business community to the government and education sector to provide workers with the skills required to fit into the modern workplace. Some critical commentators would understand this in terms of producing labour with the malleable skills to work in flexible environments. The important question though is whose responsibility should this be, and what should be the role of the employer in developing such capacities.

The second point relates to understanding a skill shortage not as a simple recruitment difficulty but as a broader skills gap or skill deficiency within the firm. This can be understood in a number of ways, but most simply put is a situation where workers in a firm or sector do not have the required skills to perform their current role, or where a firm believes that its current workforce is ill equipped for its skills demands in the future. Data reported by the individual UK Sector Skills Councils indicate that, in aggregate, reported skills gaps outnumber skills shortages (in recruitment terms) by eight to one. However, there are other sources of data that reveal the situation may be even more complex.

The latest Skills Survey shows that many workers feel they are over qualified for their current role or have skills that they are not utilising at work. The survey also reveals that a large minority of British workers are employed in jobs that require no qualifications what so ever. At the same time, we know that there are massive deficits in basic skills in the UK workforce. Summarising what all these, seemingly contradictory trends, mean is complicated, but is perhaps best expressed in terms of a gap that exists between the skills supplied via the external labour market and the skills demanded and used by British employers. How the gap between supply and demand is married leads to a broader consideration of how to coordinate skills policy.

The issue of skills coordination is best understood with reference to international comparisons. The UK economy is not unique in its experience of skills shortages and recruitment difficulties, in particular sectors at particular times, but the issue of cyclicality seems to be more embedded in the UK and the problems of skills gaps more entrenched. Two factors are of obvious importance here: long term investment horizons and the utilisation of skills within work. The ability of firms to take a long-term perspective is highly influenced by the system of corporate governance that exists within a particular economy. The strong market orientation that UK firms face means that investments often have to be paid back within short-term horizons and outcomes need to pay in the short-term. Often investment in training is seen as highly susceptible to such short-termism – training budgets are often the first to be cut during hard times as gains can be difficult to prove in purely accounting terms. The situation is different, for example in Germany and Japan, where the financial ownership structures of firms are less prone to such short-term mentalities and longer-term investments can be made.

But international comparisons reveal that developing skills is about more than just the financial regime, as corporate governance arrangements also relate to broader structures of decision-making within firms. In this regard, the degree of employee involvement and participation in the decision-making structures of UK firms is far less than that of their counterparts in much of continental Europe, where structures of social partnership are more embedded. In Germany for example, there is a strong system of codetermination, where decisions around training investments and skills are influenced by sectoral level collective bargaining and works council consultative bodies at firm level.

In France, social partnership is highly developed at sectoral level and is supported by a wide range of legal mechanisms, one example of which is a legal obligation for firms to invest a certain percentage of pay roll in staff training. A lack of social partnership in the UK, along with short-term financial perspectives and little by way of legal obligations on firms in the area of skills, means that there are few social obligations impacting on how British firms invest in and utilise their staff. Of course, this is often seen as beneficial, as regulation, red tape and rigidities are taken to impede competitiveness.

Yet, others would argue this creates a problem. True, the regulatory structures that exist in other European economies impose rigidities on firms, but these can often act as a form of what the Germancommentator Wolfang Streeck refers to as ‘beneficial constraints’. Free from such constraints, UK firms are able to restructure their workforces with ease; workers are laid off at short notice (often with detrimental consequences for long term skills planning), work is not organised to take best advantage of workers’ skills and the responsibility for long-terms investment decisions (for example in relation to skills) is deemed to be the locale of other stakeholders, be it the state, the education system or individuals themselves.

Ultimately, tackling the UK skills shortage problem needs indepth understanding of the cyclical nature of the UK market. The issue lies deeper than recruitment difficulties, but hiring problems are often themselves the result of harsh cut backs in skills during periods of economic retrenchment. How skills shortages are dealt with most certainly requires a response from government and policy amendment, but it also requires a deeper commitment from employers to longerterm investment horizons in firms.

This can be facilitated in part by a modernisation of employment relations that allows more room for employee participation and broader stakeholder involvement and engagements with skills development within firms. Key here is organising work in a way that allows workers to make use of the skills they have acquired, or that encourages the further development of skills amongst workers. Longer-term career structures and on going systems for workforce development are also required. There are some signs that this has been recognised in the UK by recent developments in the skills system. Increasingly, trade unions are advocating learning and skills upgrading in the workplace and this has been supported by an increasing number of employer-union learning agreements and statutory rights for union learning representatives.

More broadly, a new body of Sectoral Skills Councils have been created, whose role is to analyse the supply and demand for skills within sectors, identify resultant skills gaps and create co-ordinated responses to tackle such gaps. Sector Skills Councils are all legally required to develop Sectoral Skills Agreements, in conjunction with employee representative bodies, to advance the skills agenda and to raise the long-term skills profile of sectors. This is taken by government as evidence for a strong role for employers, and their specific interests, within the UK skills system. We will have to wait and see if employers chose to participate in such developments and, as a consequence, take more responsibility for developing and utilising skills for their current and crucial future needs.