The Meaning and Determinants of Skills Shortages†

What do employers mean when they say that they face a ‘skill shortage’ at their establishment(s)? How employers conceive of skill shortages matters because they are the prime, often the only, source of information allowing judgments to be made about skills disequilibria. What employers say therefore affects general perceptions about the adequacy, or otherwise, of skills supplies. In Britain’s employer-led system of training this is likely to have a strong bearing on policy formation. Moreover, some economic analysts have attributed significant constraints on British economic growth to skill shortage indicators derived from employer surveys. The problem to be addressed in this paper is that there remains substantial ambiguity about what a skill shortage amounts to. The British Government’s Training Agency defined a ‘skills shortage’ as existing ‘when there are not enough people available with the skills needed to do the jobs which need to be done’ (Training Agency, 1990, page 29). On the one hand, it is said, there may be a difficulty in recruiting workers with the right skills. On the other hand, there may be a ‘skills gap’ when ‘firms’ existing staff do not have the skills they need to do their job effectively’ (ibid.). This notion of a skills shortage can be useful because of its broad perspective, but it may well not correspond to employers’ own interpretations. Moreover, previous research has pointed to ambiguities over both the notion of ‘skills’ and the notion of ‘shortage’. It is often held that the ‘skills’ being referred to are essentially technical, defined by the ability to perform given tasks or to master various techniques, whether manual