Firms grapple with labour and skills shortages

As devel­oped economies around the world slow­ly reopen after strin­gent lock­downs, many are faced with wide­spread labour and skills short­ages.

The UK is a prime exam­ple, with the coun­try in the mid­dle of a per­fect storm. At the same time as 15 out of 18 indus­try sec­tors are report­ing record vacan­cy lev­els, accord­ing to the Office for Nation­al Sta­tis­tics, a drop in labour sup­ply is caus­ing hir­ing dif­fi­cul­ties across the econ­o­my. 

The Res­o­lu­tion Foun­da­tion and the Cen­tre for Eco­nom­ic Per­for­mance at the Lon­don School of Eco­nom­ics recent­ly pub­lished a study on the impact Covid has had on the labour mar­ket. The report – titled Begin Again? – found that the num­ber of peo­ple who are eco­nom­i­cal­ly inac­tive, mean­ing not work­ing or look­ing for work, has risen by 586,000 since the start of the pan­dem­ic. 

The increase is par­tic­u­lar­ly marked among 55–64 year olds. That bucks a pre-pan­dem­ic, decade-long trend, in which work­ers over 50 account­ed for 88% of the growth in the over­all size of the UK labour mar­ket. Young men aged 25–34 have also con­tract­ed as a group in employ­ment terms. 

Brexit headaches

The loss of EU work­ers is also being felt, says Ger­wyn Davies, senior labour mar­ket advi­sor at pro­fes­sion­al HR asso­ci­a­tion the Char­tered Insti­tute of Per­son­nel and Devel­op­ment (CIPD). 

While Brex­it had already put many off work­ing in the UK, Europe-wide migra­tion restric­tions caused by the pan­dem­ic have like­wise tak­en their toll. This sit­u­a­tion has had a par­tic­u­lar­ly marked impact on low-paid sec­tors, such as food pro­cess­ing and social care, which the domes­tic work­force tends to view as unat­trac­tive.

For many years, employ­ers have been able to do what they want­ed, but the shoe is now very much on the oth­er foot

“It feels as if the short­fall is actu­al­ly much high­er than it is as the num­ber of old­er and EU work­ers rose sharply over the last decade in line with a sharp increase in employ­ment, so demand met sup­ply,” Davies explains. “But because they’re few­er now, it’s come as a big shock and employ­ers are scram­bling to fill jobs.”

Although he believes it was always a “prob­lem wait­ing to hap­pen”, Davies acknowl­edges it couldn’t have come at a worse time, with hir­ing activ­i­ty being so high.

Shortages and mismatches

Anoth­er chal­lenge is weigh­ing on the econ­o­my: skills short­ages. While these are also noth­ing new, they’re exac­er­bat­ed by the inad­e­quate labour sup­ply. 

The exper­tise avail­able on the mar­ket increas­ing­ly fails to match employ­ers’ needs.

A grow­ing “skills mis­match” is a key issue, though it’s lit­tle dis­cussed, accord­ing to the Nation­al Cen­tre for Uni­ver­si­ties and Busi­ness. 

Davies agrees the skills mis­match is anoth­er impor­tant trend. “The vast bulk of jobs cre­at­ed over the last decade are pro­fes­sion­al and man­age­r­i­al, but edu­ca­tion­al attain­ment lev­els have not risen in line with that growth. There’s still a rel­a­tive­ly high pro­por­tion of young peo­ple who haven’t attained ‘A’ lev­el qual­i­fi­ca­tions, which means employ­ers are hav­ing dif­fi­cul­ties fill­ing those posi­tions,” he explains. 

Cori­na For­man, HR direc­tor at par­cel deliv­ery net­work APC Overnight, sees the skills mis­match as a grow­ing chal­lenge. 

“Some of it is down to the way tech­nol­o­gy is reshap­ing our world, which is cre­at­ing dif­fer­ent ways of work­ing, chang­ing employ­ee expec­ta­tions and leav­ing every­one run­ning to catch up,” she says. “This means that if as employ­ers we con­tin­ue to define skills and tal­ent as rel­a­tive­ly fixed attrib­ut­es that peo­ple either have or don’t have, the skills short­age will con­tin­ue.”

When recruit­ing either inter­nal­ly or exter­nal­ly, For­man thinks it’s impor­tant to start defin­ing skills more broad­ly, con­sid­er­ing how adapt­able and inno­v­a­tive peo­ple are and eval­u­at­ing their propen­si­ty to learn. As an exam­ple of this apti­tude ver­sus expe­ri­ence and trans­fer­able skills-based approach, she cites the company’s new recruit­ment man­ag­er, who has a sales rather than tra­di­tion­al HR back­ground.

“If skills are defined more broad­ly, you can cre­ate work­place learn­ing cul­tures that are able to deal with con­tin­u­ous change as part of work­ing life,” she argues. 

Continuous learning

This kind of approach is only going to become more impor­tant over time, accord­ing to the UK Skills Mis­match in 2030 research paper by the Indus­tri­al Strat­e­gy Coun­cil, a gov­ern­ment advi­so­ry body. It indi­cates that because 80% of the 2030 work­force is already in employ­ment today, reskilling will be vital until the end of the decade if employ­ers and the wider econ­o­my are to avoid con­straints in terms of com­pet­i­tive­ness and growth.

The prob­lem is that lev­els of gov­ern­ment and employ­er invest­ment in adult train­ing, which were already low, have “remained flat at best”, the paper says. This means that if the cur­rent tra­jec­to­ry is main­tained, up to 20% of the UK work­force could lack the skills to do their job in nine years’ time. That’s par­tic­u­lar­ly true in tech­ni­cal fields, such as dig­i­tal, but also in soft­er man­age­ment areas like deci­sion-mak­ing.

Peo­ple want to work for a com­pa­ny where both their role and the organ­i­sa­tion has mean­ing and pur­pose

To ensure her work­force has the required skills, For­man has intro­duced a range of learn­ing and devel­op­ment path­ways. These include a two-year lead­er­ship devel­op­ment pro­gramme, the cre­ation of a ded­i­cat­ed learn­ing acad­e­my and the devel­op­ment of a mobile learn­ing app, which enables employ­ees to under­take their train­ing in “small, bite-sized chunks”.

Saman­tha Edmond­son is head of tal­ent at quan­tum com­put­ing start-up Uni­ver­sal Quan­tum. She has iden­ti­fied infor­mal learn­ing as a response to the skills gap. For exam­ple, one of the company’s quan­tum physi­cists offers an hourly drop-in ses­sion once a week to take peo­ple through the basic con­cepts at their own pace and answer ques­tions. 

Employee engagement

Learn­ing and devel­op­ment oppor­tu­ni­ties also help build employ­ee engage­ment, which in turn sup­ports staff reten­tion. This makes it par­tic­u­lar­ly valu­able in a jobs mar­ket where “everyone’s com­pet­ing with every­one else for tal­ent” and wage infla­tion is start­ing to mount, says Steven Kil­patrick, chief exec­u­tive for the UK and Ire­land at dig­i­tal recruit­ment agency, Gojob. 

The best approach, he says, “is to focus on engage­ment, engage­ment, engage­ment, which means doing all you can to build a con­nec­tion with your employ­ees and look­ing after the tal­ent you’ve got. For many years, employ­ers have been able to do what they want­ed, but the shoe is now very much on the oth­er foot.”

Oth­er ways to build engage­ment include ensur­ing a diverse and inclu­sive cul­ture, hav­ing a lead­er­ship team that pri­ori­tis­es peo­ple, sup­port­ing a flex­i­ble work­ing mod­el, and the notion of ‘pur­pose’, as Edmond­son explains.

“Peo­ple want to work for a com­pa­ny where both their role and the organ­i­sa­tion has mean­ing and pur­pose,” she says, “so it’s about hav­ing an envi­ron­ment where every­one knows what their con­tri­bu­tion and impact tru­ly is.”

This is not to say that employ­ers should ignore the poten­tial of exter­nal recruit­ment. 

“Employ­ers need to use as wide a range of tac­tics as pos­si­ble to off­set the cur­rent sit­u­a­tion in which demand for labour vast­ly exceeds sup­ply,” Davies explains. This ranges from broad­en­ing recruit­ment chan­nels to widen­ing oppor­tu­ni­ties for groups like old­er return­ers or peo­ple with dis­abil­i­ties. “It’s about tak­ing a more imag­i­na­tive approach.”

So is the labour and skills cri­sis sim­ply a pan­dem­ic-relat­ed blip or will it endure for the long term? Davies thinks it’s cur­rent­ly impos­si­ble to say. How­ev­er, change is unlike­ly while immi­gra­tion chal­lenges con­tin­ue to bite and old­er work­ers fail to return to the work­place.

Employ­ers must undoubt­ed­ly come to grips with the issue. 

“We’re now com­pet­ing with coun­tries like Chi­na every day and if we con­tin­ue to let the sit­u­a­tion grow, we could find the coun­try becomes unat­trac­tive for glob­al invest­ment,” says Kil­patrick. “So organ­i­sa­tions need to be agile and cre­ative. It’s about sur­vival of the fittest.”

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