Description
This report aims to improve our understanding of the causes of skill shortages, the way businesses respond and the short-term consequences of skill shortages. Reponses from small- and medium-sized businesses reveal that skill shortages matter, but that their relationship to firm performance differs according to the nature of the skill shortage. The findings confirm that skill shortages are a complex labour market phenomenon and give rise to complex responses by firms.
Summary
About the research
Despite the attention paid to skill shortages, the evidence used to evaluate their incidence and the causes and responses by firms remains thin.
This study, based on the answers from small to medium-sized businesses who responded to questions about skill shortages in the Australian Bureau of Statistics (ABS) Business Longitudinal Database, offers a business-level perspective on skill shortages. If a business reported that a shortage existed based on whether they ‘experienced an insufficient supply of appropriately qualified workers available or willing to work’, they were then asked to identify the causes and their responses to it.
Key messages
-
While the causes of shortages are diverse, a lack of specialist knowledge is the dominant factor. The uncertainty in forecasting long-term demand, slow recruitment processes and high prevailing market wages are also involved.
-
Complexity matters, with firms encountering either simple or complex shortages. Most firms respond to simple skill shortages by better utilisation of their existing workers, such as increasing their hours. More extreme options such as reducing output are only activated when there are multiple causes.
-
Simpler skill shortages are an indication of firm success, are less persistent over time and are positively associated with firm survival, higher investment and higher sales.
-
The implications of complex skill shortages are less clear, tend to be persistent over time and can be associated with firm decline.
-
Agriculture, construction, and personal and other services are the industries most likely to report complex skill shortages.
Tom Karmel
Managing Director, NCVER