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Understanding the skills deficit now

Understanding-Skills-Deficit

The skills deficit in the UK is not a new challenge. As reported in our recent skills-focused white paper, in 2019 a quarter of all vacancies were skills-deficit related, with 60% of these in medium- and high-skilled roles.

Office for National Statistics (ONS) data from October 2021 reveals a record high number (1,102,000) of job vacancies between July and September 2021, with the biggest increase (59%) seen in accommodation and food services. This paints a promising picture of economic recovery; the rise in vacancies reflects the re-opening of many sectors. There’s also been a reduction in unemployment: it now sits at 4.5%, a decrease of 0.2% from last quarter. Yet, as pointed out in the Big Issue, these figures obscure a more complex story: “While there are 62,000 more payrolled employees compared to pre-pandemic levels, there are 161,000 more on temporary contracts, and 144,000 accepting these only because they have been unable to find permanent contracts.” They argue that much of the positive news around employment relates to low-skilled, temporary and insecure work; a gap is preventing people from finding secure employment to match their skillset and their needs.

A pan-sector skills gap

The mismatch between jobseekers’ skills and the skills employers need continues to impact human resources departments. Businesses across a wide range of sectors are struggling to fill vacancies. The Open University Business Barometer 2021 reports that 40% of business leaders in 2021 are struggling to recruit specialist talent, while over a quarter recognise the difficulty in hiring entry-level staff.

It’s a struggle that’s being reported across sector-specific media platforms. For example, the sudden resurgence in available jobs in the arts sector has left arts organisations struggling to recruit the talent they need. Arts Jobs reported: “The number of job listings on our site more than doubled over the six months to September. When we surveyed the sector, 71% said it was more difficult to recruit now than before the pandemic. The hardest jobs to fill were middle-level managerial roles followed by senior positions, indicating a potential talent drain.” Similarly, RIBA Future Trends Survey has found that one in five architectural practices are struggling to find the talent they need. The reason cited is the exodus of talent from the UK due to Brexit and the pandemic.

At the same time, the government is issuing Skilled Worker Visas to recruit the labour needed in the UK from elsewhere. The list of shortage occupations that qualify includes everything from scientists and engineers to dancers and graphic designers.

The Open University’s barometer quotes Kitty Ussher, Chief Economist at the Institute of Directors (IoD): “This year’s Business Barometer demonstrates the huge impact that both the pandemic and Britain’s decision to leave the European Union have had on recruitment at all levels; over six in ten firms now say they have a skills shortage. On the plus side, we are also seeing optimism around the potential for remote working to fill skills gaps and an appreciation of the role of apprenticeships to train tomorrow’s workers. We’re asking the UK government to put lifelong learning, retraining and upskilling at the heart of their forthcoming Budget so that firms and individuals alike can fully take advantage of the massive opportunities that are available as our economy recovers and restructures.” Ussher’s outlook is cautiously positive, yet the emphasis the IoD wanted to see on lifelong learning did not appear in the autumn budget.

How we got here: Brexit and coronavirus

The combined effects of Brexit, the pandemic and furlough have led to a general shortage of workers, as well as a skills gap. The dramatic changes we’ve seen play out in economic terms have altered the way people live and work, the types of roles (and therefore skills) that are in demand, and those that are obsolete. Interestingly, the proportion of people who are out of the workforce because they are studying is the highest it has ever been – which could be taken as a good sign that the workforce of the future will be better equipped with the skills we need. However, that does not solve the challenge facing today’s employers and jobseekers.

Another reason for the so-called Great Resignation is that workers have become accustomed to working remotely during the pandemic. Now that the situation is safer, they are being asked to return to the office. Having decided that the flexibility afforded them by the pandemic contributes positively to their lifestyles and wellbeing, significant numbers of employees do not want to give these freedoms up and are resigning as a consequence. However, the conditions workers want to see are not easily found, which is one reason many vacancies are now so tough to fill. Businesses need to catch up with employee demands in order to be seen as an attractive prospect by employees.

The talent pool

So who, then, is currently looking for work? As it stands, data regarding the furloughed population who are in/out of work following the end of the scheme has not yet been published. However, it is fair to assume that there will be a significant number of furloughed people now seeking work, particularly as many industries continue to lag behind their pre-pandemic levels.

ONS data from October 2021 shows that employees with a degree or equivalent qualification were 8.9% less likely to be furloughed when compared with those whose highest qualifications were GCSEs. Across most industries, people who are currently corporate managers, directors, or in professional occupations were less likely to have been furloughed. Yet as we have seen, these people are more likely to now be voluntarily quitting their roles in search of a better work/life balance.

ONS furlough data implies many jobseekers are likely to be low-skilled and searching for more junior positions. What’s more, half of those furloughed were furloughed for over three months, and this group were less likely to be re-employed in August 2021. The scarring effects of longer-term unemployment are well documented, and studies – such as by Edin and Gustavsson (2008) – demonstrate the depreciation or loss of skills that can occur during prolonged absences from work. They wrote: “Unemployment, by arresting skills formation, gives rise to further unemployment.” And a more recent (2021) study of skills and unemployment flows that takes into account data from 30 countries shows a similar correlation between being out of work and a loss of skills. Furlough, as a period of unemployment and/or inactivity, can therefore be understood to contribute to a decrease in skills and subsequently in the likelihood of finding employment.

ONS data also shows that the proportion of people who have been furloughed was higher for workers under 24 years of age or over 65. Again, this contributes to the supposition that job seekers are likely to be low skilled. Young people have had less time to accrue skills due to a much shorter career, and are much more likely to have been in low-paid, low-skilled, low-security work before being furloughed. Older people are more likely to lack digital skills – now considered essential in the workplace – and are also subject to age discrimination which significantly decreases their chances during the hiring process. Ageing Better reports that people aged 50 and over who lose their job struggle the most to return to work, and are at greater risk of becoming long-term unemployed.

What’s more, while pre-pandemic trends show young people tend to move jobs much more frequently, someone over 65 has likely not had to engage in employment processes for a long time. Their lack of recent practice in interviewing and writing CVs will make it more challenging to return to the workplace. Employers need to make concessions for this group in recognition of the experience that older employees can contribute, despite a possible shortcoming in current technical or other skills.

Disabled people who have been furloughed are also more likely to have slipped into unemployment than non-disabled furloughed people. Therefore, it appears that those with higher needs – such as reasonable adjustments to hiring or working conditions, or additional training and support to enter and thrive in the workplace – are more likely to be currently seeking work.

A more positive outlook

The Opinion and Lifestyle Survey data shows that, “despite not actively using their work skills, the skillset of the furloughed population was more like the skillset of employees, rather than the unemployed”. This suggests that although moving back into employment will not be without its challenges, the path to work is less thorny than for those who have been unemployed. Confidence – alongside skills – is a huge factor in a successful interviewing process and someone who has been in work recently, and is still technically employed, will have more of both than someone who is out of work.

What’s more, the survey revealed that, “the furloughed population reported being good at a similar number of skills, and good at the same types of skills as employed people who had never been furloughed. They also reported similar skills they would like to improve upon.” There is a slight discrepancy – the number of skills someone on furlough wanted to improve were slightly more than an employed person reported – but this again could be ascribed to the confidence felt by someone who is currently using and being recognised for their skills.

It has also been found by the ONS that the positive effects of holding A-Levels over GCSEs as their highest qualification was four times smaller for people who had been out of work for more than a year. Conversely, having completed training in the past year boosts a person’s chances of returning to work. This is welcome data, intimating the significant role that skills training can play in the path to employment, and implying that training programmes and short courses could help to level the playing field and reduce inequality in access to employment.

A road forward: employment for all

It is possible to see the current challenges facing UK employers as an opportunity for reform. As the ONS has shown, training performed in the past year can boost employment prospects. As the UK’s furloughed population was largely low skilled, or working in sectors that are yet to return to full capacity, it is important that the focus on upskilling and retraining employment-aged people is kept front and centre. There have been successes with the government’s existing programmes to do this, including Restart and Kickstart, which target younger and older people particularly at risk of long-term unemployment.

Given that the OECD has found achieving age diversity in the workforce could boost GDP by 19% in the next 30 years, this is not just a priority for equality, but also for the economy. Age UK proposed that a full ‘Career Review at 50’ becomes customary in order to combat skills deficits and age discrimination. This, they say, should be introduced “to help ensure people have the skills and knowledge to keep working, and retire in a way of their choosing”. Perhaps this could provide a means, beyond the current Plan For Jobs scheme, to ensure that age does not continue to be a factor contributing to unemployment.

It is clear that a continued emphasis on skills as the route into sustainable employment is going to be essential to close the skills deficit that UK employers and hopeful employees are currently grappling with. To fill positions left vacant by employees who’ve returned home due to Brexit or the pandemic, and to prepare the workforce for technological and other changes that continue to shift the employment landscape, lifelong learning needs to become routine for everyone. At the same time, employers need to re-think their approach to employment, adjust working terms and offer on-the-job skills training in order to attract and retain employees. 

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