The Meaning and Determinants of Skills Shortages

In this paper we use establishment‐level data to examine what managers mean when they report having skills shortages. We find that the concept of a skills shortage is not always the same as a hard‐to‐fill vacancy despite the latter being used by many authors who have considered the economic consequences of skills shortages. It seems that, while employers appear not to have any problems for themselves in interpreting questions on ‘skills shortages’, we cannot rely on them being perceived in a uniform way by all employers. Indeed, many employers stress that, amongst both their existing workforce and job applicants, there appear to be important shortfalls in motivational and attitudinal skills, leading us to believe that social skills are an important part of the skills said to be in shortage. Our findings point to two main conclusions for future research. First, studies that investigate the causes and effects of ‘skill shortages’ need to pay greater attention to their definition and measurement. Secondly, in future research on establishments and their skill formation practices, further steps could be taken to gain clarification either directly or indirectly from respondents as to the experiences they choose to classify as a skills shortage.