Category Archives: Labour market information

Seven reasons why employers may be unable to recruit

I’ve been reading the recent paper from Warwick’s Institute of Employment Research and IFF on skills mismatches in the UK economy.

It’s a long paper, and quite technical, and much of it deals with the vexed question of how to identify skills mismatches and shortages in the first place, which is something of great interest to me, but a trifle niche. But there are some important findings in here for policy, practise and employers, and I’m going to look at it from the perspective of graduate recruitment.

The report combines analysis of data from surveys such as the 2013 Employer Skills Survey (the 2015 survey has subsequently been published) and interviews and case studies of employers who are experiencing skills mismatches and shortages to explore why they’re happening and what the response is, and it’s this part that is particularly interesting.

The basics of the report are that the authors believe that there are not many absolute skills shortages – where there are just not enough people with certain skills and training to fill demand – in the economy and where they are tend to be in management, in graduate roles in IT, in engineering and in business services (the latter in roles such as procurement and marketing/PR), and in skilled trades. It also, interestingly, finds that there’s little evidence that we have too many graduates either, but does counsel that

graduates who were mismatched (over-qualified and over-skilled) in their first job had a higher likelihood of still being mismatched to their job five years later

which has implications for the way we advise graduates on their early stages of their career.

There is also a mixed view of the apprenticeship agenda – there is a clear potential role for apprenticeships in meeting certain skills shortages, but some employers still need convincing.

It is at an intermediate level where skills supply is not meeting demand. Apprenticeships are well placed to meet this demand but there is prima facie evidence that employers are unwilling to make what often amounts to a substantial investment in this type of training because of concerns about it meeting their specific, unique skill needs and being able to retain the services of the apprentices once they have completed their training…. Accordingly there needs to be some means of reducing the risk that employers face when investing in programmes such as Apprenticeships

But the part that interests me is where the researchers delve into why employers struggle to fill vacancies. The Employer Skills Survey gives the most common reason as ‘low number of applicants with the required skills’, which can give the impression that there’s nobody out there, or that applicants are not good enough. In actual fact, eight main overlapping reasons emerge from the work – I’ve condensed them to seven as I think two of them can be combined.

  1. Not enough people. The economy has grown relatively quickly since economic recovery began and so some employers who want to expand have found that there are not enough qualified employees in some fields to meet demand. Engineering, IT and business services are all affected here.
  2. Disadvantageous location. Anywhere that is off the beaten track and, in particular, does not have good public transport links, is often perceived as a less desirable job and those locations will need to be sold to potential employees. Graduates tend to be more concentrated in larger cities and areas outside those cities may find a smaller talent pool to draw upon. And not everyone wants to work in London, either.
  3. Narrow job specifications. The narrower you make your specification, the fewer people will have the skills you want and if the role is especially niche, the less likely training providers will run the specific courses you need people to have attended. This can often go hand-in-hand with other issues on the list. In these cases, employers may need to be a little more flexible with their requirements and readier to accept the need to train new graduates.
  4. Wanting cutting edge skills. Rapid technical change means employers seek skills mixes that may not really have come to the employment market yet in order to exploit new business opportunities. Obviously, this is particularly pronounced in the tech sector. We need to think about how universities can address issues of rapidly moving skills demand in the context of degrees that typically take three years to deliver, but also employer training may have to play a central role.
  5. Wanting skills that are on the way out. Skills supply can be falling faster than demand. This is best illustrated with an example – a lot of people have old gas boilers which need servicing, but the technology is obsolete and newly trained gas engineers are obviously trained in new tech. As experienced engineers retire, their skills are still needed at the moment, but new engineers are understandably reluctant to train in outdated skills. This is less of an issue in the graduate market, but it’s not one that’s readily soluble at the moment unless there’s a way to be very creative with training.
  6. Unattractive terms and conditions. Never assume that a company – particularly a smaller business – really knows what the current going rate for new employees in their industry and in their area actually is. They will pay what they think they can afford and when that happens to be below the local wages for the people they need, that’s a problem. This seems to be a particular issue for graduate roles in tech, where starting salaries can be quite high. Employers in this position may need to learn to sell their positions effectively, to write better job ads, and we need to help them fully understand local labour market conditions.
  7. Unwillingness to compromise. ‘I want the perfect employee’.  The employer has written a job spec, and if they don’t get exactly that graduate, why, they won’t recruit at all. This specification often asks for a specific mix of technical skills, soft skills, the right qualification (employers here are wary of what they see as overqualification as they see that as a signal that the employee will not wish to stay) and the right kind of employment history (such as not having moved jobs very often). There’s a lot going on here, to do with managing employer expectations, and with ensuring that graduates – particularly technical graduates – supplement good technical skills with soft skills to ensure they can get good jobs.

Employers who struggle to recruit find increased pressure on existing staff, lose business,  and struggle to innovate and adapt to change, so it’s in everyone’s interest that we support them to understand the labour market, to make sure they write good  job adverts and have realistic expectations of the talent that is out there so that business can find it easier to get – or train – the people it needs to grow.

There is a finite supply of talent out there and every time you specify a skill or an attribute, you exclude a few more people who feel they don’t match that specification. It’s not hard to get your potential employee pool down very quickly, and so we all have to work to make sure that pool has the best talent mix we can.

 

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2016 – the year of graduate undersupply

This morning, RICS, the Royal Institute of Chartered Surveyors, released their Q4 Construction Market Survey. 66% of construction professionals reported recruitment difficulties to be the most significant barrier to growth in the last quarter of 2015. 60% of survey respondents had difficulties finding quantity surveyors.

At the same time, HESA’s new figures on student numbers showed that the number of students enrolled in UK higher education fell 1% last year.

The RICS data follows a pattern emerging from many sources in recent months. The British Chambers of Commerce noted in their Q4 Quarterly Economic Survey that 79% of manufacturing companies and 64% of service companies had trouble recruiting last quarter (more data on their excellent web site). The image below, taken from their site, puts those difficulties into context.

BCC recruitment difficulties
The British Chambers of Commerce do some very good graphics

And a recent report from Universities UK (to which I contributed) notes that we currently have an undersupply, in total, of graduates.

We will shortly get Employer Skills Survey data from the UK Commission for Employment and Skills that will help us to map the nature and extent of many of these undersupplies, but even data from the 2013 survey outlined widespread shortages of graduates across multiple sectors.

Some of the most serious are in engineering, where we simply don’t have enough graduates in most disciplines, and in IT, where there are not enough graduates with the skills to meet demand. The RICS report shows that allied professions particularly surveyors, but also planners and related roles, are in short supply. But the focus on STEM skills does tends to distract from the fact that we also have widespread graduate recruitment difficulties across many service industries.

There are two main ways we can address this issue wrongly. The first is to assume that the problem is that graduates are not good enough and berate the education system. Although not all graduates will be as ready to enter the workplace as they could be, this only applies to a minority. The 2013 ESS found that the large majority – well over 80% – of recruiters felt that graduates were well-prepared for work. The second is to blame graduates for their career choices. Now we charge students £9,000 a year to take a higher education degree, explicitly on the grounds that they will personally benefit from their study, they quite reasonably feel they can then do as they choose with that qualification.

The issue is that there are not enough graduates, and that those we do have are not always easily convinced or trained to enter the professions where we most need them, and that this undersupply of graduates is an active barrier to growth in some industries.

This can be frustrating. A majority of graduate occupations are, at least in theory, open to graduates from any discipline, and this goes particularly for occupations in business service industries. We see this most starkly in marketing, an expanding occupation with significant demand for graduates and where marketing graduates made up a relatively small minority of entrants in 2014 because there were simply not enough to meet demand.

But it’s not always that easy. For many graduates in less vocational degrees that allow significant career flexibility, the sheer range of options can itself be paralysing. It becomes very difficult to choose from the dizzying range of career options available, especially when a student is not really familiar with what they all entail. And whilst there is more some sections of the economy can do to persuade workers with the right skills to join their industries, the same is not true everywhere. If we want to fill mechanical engineering vacancies, we need suitably qualified people.

But are we doing enough to help that process along? Do we make it easy enough for graduates with appropriate qualifications to convert to professions like engineering or surveying where the lack of qualified staff actively harms economic growth?

As we go into 2016 with recruitment difficulties towards the top of the agenda, these are some of the questions we need to wrestle with.

For institutions, we need to ensure that students get the right support and guidance and to build their confidence so that they feel equipped to make decisions. Just because the market is rather better for graduates in 2016 than it was in 2012 doesn’t mean that the decision making process is any easier.

For employers, this year will see more recruitment and retention difficulties. It will mean being more innovative about addressing them, looking more widely at the likely supply of graduates in their business areas, examining reward packages and ensuring that they remain competitive and about developing new strategies to cope. These issues are not likely to go away until we have another recession, and even then they will be only temporarily put on hold before they return.

For students, this means recognising that good graduates will be in demand from multiple sectors, but only those who keep their options open. Good advice and guidance can help make those difficult decisions – but they should never forget that they have a long working life ahead of them, and it’s ok if they don’t quite know what they want to do, or even if they spend a little while doing something that they later conclude isn’t for them. Better to make career mistakes early.

As recent economic news, and the worries expressed from some quarters shows, there is a lot that can happen in 2016. But the most likely outcome at the moment is that in 2017 we’ll have more shortages of graduates over more areas. Let’s try to mitigate that as much as we can.

The 2016 graduate labour market in the UK

2015 turned out to be quite a positive year for the UK graduate labour market, so let’s take a look at what the new year might hold. As always, we will come back in 12 months to see how these predications fared.

And the first prediction carries on where we left off in 2015.

Getting used to skills shortages and recruitment difficulties

Recruitment difficulties and skills shortages were a feature of 2015 and they will be, if anything, even more central to the UK graduate labour market in 2016. We now have widespread graduate shortages across a range of key sectors, in engineering, in building and construction, in teaching, in health, in IT, in business services and in niches throughout the economy. Shortage of available graduates is affecting the ability of a minority of businesses and sectors to meet demand, and we should probably expect these difficulties to spread to other parts of the economy. 2016 will be about businesses learning to live with not always being able to find graduates when they need them and making plans to mitigate or avoid shortage. We’re not in 2011 any more.

Broadly positive employment outlook

Employment intentions are still up, but the rate of increase is slowing. Some employers, especially those in professional or IT services who had recruited strongly in the last year, may get more cautious on hiring as skills shortages make it harder to recruit, but overall we will likely see modest improvements in the graduate employment market and an increasingly benign jobs market for new graduates – although that doesn’t mean we can or should expect every new graduate to find work easily, or that those who don’t are failing.

But we do need to be careful. The outlook for manufacturing employment is not as positive, affected by weak export markets, by the continuing downturns in steel and in oil and gas, and by skills shortages. There are other factors at play that affect confidence as well….

An uncertain Euro referendum

I can’t bring myself to use the phrase ‘Brexit’, but 2016 looks likely to see a referendum on membership of the EU at some undeclared point, there will be a vicious media campaign, and leaving the EU is not considered likely to be positive for the economy in the short term. Business confidence is likely to be affected if it looks as if there is the prospect of a Brexit (now look what I’ve done), and a reduction in confidence means a weakening of the economy, and a weakening of employment intentions. A portion of the political skirmishing is likely to feature more rhetoric – and possible action – on curbs on immigration, which will exacerbate skills shortages.

Keep an eye on wages

Low inflation is keeping a lid on wage rises in many sectors, but skills shortages mean that some in-demand professions (especially in engineering, IT and professional services) are seeing much stronger wage pressures. The big question is about the salary expectations of the new cohort of graduates – the first to have paid the full £9,000 a year for the duration of their degrees. The repayment threshold of £21,000 means that many graduates in professional employment will start repaying from day 1 – will we see wages rises (as employers were predicting in 2011)? Will we see the rise of jobs paying £20,995 rather than £21,000? 2016 will be an interesting year for graduate wages.

The urbanisation of graduate work

Graduate employment is concentrated in cities, and that shows no sign of of changing soon. Over 40% of the working population in Newcastle, Manchester, York, Sheffield, Leeds, Bristol, Bath, Oxford, Cambridge, Cardiff, Swansea, Newport, Aberdeen, Dundee, Edinburgh and Glasgow had a degree or equivalent at the end of 2014, and when we get figures for 2015, Liverpool, Nottingham, Leicester, Birmingham, Coventry, Norwich, Ipswich and Southampton could all have joined the list. For graduates looking for work – look to the cities. Smaller urban areas, and rural areas, will have some roles, but mainly in a public sector which is likely to continue to lose jobs.

For policy – graduates will play an increasingly important role in urban economies, and we need to get to grips with a future where the largest group of employees in many of our cities – in some cases a majority, and not just in London – will have degrees.

There are undoubtedly more themes that will emerge in 2016 for the graduate labour market, and I’ll keep you posted if and as they do. Happy New Year everyone.