APPENDIX 24
Memorandum from the Institute of Directors
(JG 32)
In response to the Education and Employment
Committee's request for submissions on "Employability and
Jobs: Is there a gap?", the Institute of Directors wishes
to make a number of theoretical and practical observations.
The request for submissions to the inquiry expresses
the concern that in some geographical areas there is a jobs gap
and that supply-side policies—such as the New Deal—alone
will be an insufficient response.
EMPLOYABILITY AND
JOBS: IS
THERE A
JOBS GAP?
Our survey on skills and training earlier this
year indicated that a significant proportion of IoD members had
experienced skill shortages whilst recruiting over the previous
year.
A skills shortage may be said to pertain ".
. . where there is a genuine lack of adequately skilled individuals
available in the accessible labour market . . .". Industries
and firms may suffer from skill shortages when low rates of unemployment
result in a fall in the supply of labour. Alternatively, even
if there would appear to be an adequate supply of skilled workers
in the labour market as a whole, it is possible for companies
to experience localised skill shortages, occasioned by a geographic
imbalance in the supply of labour. Or skill shortages may simply
be a consequence of a genuine shortfall in the number of appropriately
trained individuals.
Skill shortages are clearly unfortunate because
they may force an employer to increase his rates of pay in order
to attract the individuals that he needs, which in turn may force
him to increase the prices of his goods and services, or oblige
him to reduce his profit margins. Alternatively, if the company
is unable to attract the necessary staff and cannot afford to
train existing employees to meet the relevant skills shortages,
then the company may simply have to operate less efficiently than
it otherwise would. It is rather disconcerting, therefore, to
find that 65 per cent of respondents to our survey stated that
they had experienced a shortage in the availability of suitably
skilled people while recruiting over the previous year (see Table
1).
Table 1
WHILE RECRUITING OVER THE LAST YEAR, HAS
YOUR COMPANY EXPERIENCED ANY SHORTAGE IN THE AVAILABILITY OF SUITABLY
SKILLED PEOPLE
|
| Per cent
|
|
| Yes | 65 |
| No | 31 |
| Have not attempted to recruit
| 4 |
| Don't know | 0
|
|
THE TYPE
OF SKILLED
WORKERS IN
SHORT SUPPLY
The National Skills Task Force concluded that the IT sector
and the engineering industry are the sections of the economy experiencing
the most acute skills shortages. Other surveys appear to indicate
skill shortages in the construction industry and amongst board
room and senior management. The results of our survey are broadly
consonant with other recent research on skill shortages. As Table
2 shows, 21 per cent of respondents over the last year experienced
a shortage of IT staff. At the same time, 19 per cent of respondents
stated that there was a shortage of skilled manual workers and
other technical staff. The fact that only 4 per cent of respondents
reported a shortage of engineers, while 29 per cent of respondents
said that they had experienced a shortage of professional staff,
may be partly be explained by the nature of the IoD's membership—a
significant proportion of the Institute's members are involved
in banking, finance, business and other services and only a relatively
small proportion come from the engineering sector. Nevertheless,
the high proportion of respondents reporting a shortage of professional
staff remains striking.
Table 2
IF YES TO QUESTION 2A, WHAT TYPE OF SKILLED PEOPLE DID
YOU FIND A SHORTAGE OF? (RESPONDENTS COULD GIVE MORE THAN ONE
RESPONSE)
|
| Per cent
|
|
| Skilled manual workers | 19
|
| Unskilled manual workers | 1
|
| IT (information technology) staff
| 21 |
| Other technical staff | 19
|
| Secretarial/clerical staff | 13
|
| Professional staff | 29
|
| Accountants | 5
|
| Managers | 12
|
| Directors | 0
|
| Staff with language skills |
1 |
| Health workers | 1
|
| (Skilled) sales/marketing staff |
11 |
| Media workers | 1
|
| Skilled/qualified staff (unspecified)
| 1 |
| Graduate (trainees) | 1
|
| Financial | 4
|
| Multi-skilled (unspecified) | 1
|
| Engineers | 5
|
| Drivers | 1
|
| Artistic/creative designers | 2
|
| Communicators | 1
|
| Trainers | 2
|
| Catering | 1
|
| Other | 3 |
| Don't know | 0
|
|
SIZE AND
SECTORAL DIFFERENCES
One interesting finding from our survey was that 40 per cent
(26) of respondents from the manufacturing sector reported that
they had suffered from a shortage of skilled manual workers over
the last year. Otherwise, there were no markedly different results
between the answers of respondents in general and the answers
of respondents from particular economic sectors or firm size in
this part of the survey.
HELP FOR
POTENTIAL EMPLOYEES
WITH THEIR
TRAVEL COSTS
The existence of skills shortages may indicate the presence
of a jobs gap in particular sectors of the economy. Additionally,
though, there is some evidence to show that job gaps also exist
on a geographical basis.
In its First Report, the National Skills Task Force highlighted
the phenomenon that areas of extremely low unemployment can be
contiguous with areas of acutely high unemployment. For instance,
the Report noted that whilst Workington and Whitehaven have some
of the highest unemployment levels in the country, nearby Keswick
has the lowest unemployment rate and the second highest vacancy
levels. One obvious solution to employers facing recruitment difficulties
is to look further afield when searching for additional staff
and to offer them assistance with transport to help them get to
work. Our survey showed that 7 per cent of respondents were already
helping employees with their travel costs in order to surmount
their skill shortages and a further 68 per cent stated that they
were prepared to adopt such a strategy.
Table 3
WOULD YOU BE PREPARED TO HELP POTENTIAL EMPLOYEES WITH
THEIR TRAVEL COSTS IN ORDER TO OVERCOME SKILL SHORTAGES?
|
| Per cent
|
|
| Yes | 68 |
| No | 19 |
| We do already | 7
|
| Don't know | 6
|
|
The Government can help to surmount the problem of job gaps
through a variety of supply side measures, including the New Deal.
The Institute of Directors wants the New Deal to be a success,
but another recent survey of IoD members earlier this year indicated
that the scheme suffered from a number of difficulties.
1. LACK OF
INFORMATION ABOUT
THE NEW
DEAL
Despite a formidable advertising campaign concerning the
New Deal and extensive press coverage, many respondents to our
survey stated that they wanted more information about the scheme
and how they could get involved. An exasperated chief executive
said "I have never been approached by anyone, anyhow, anywhere,
and I really would like to help". Another member commented
that "There is a need for better marketing—I have heard
of it but have not been approached as an employer". Yet another
pleaded for the Government to "Tell us more about it please—or
just something".
Another member complained that the New Deal was confusing
for employers to understand. He urged the Government to "Reduce
the proliferation of New Deals and pilots because the sheer number
of them is confusing to business".
Respondents called for more information about the New Deal.
One member suggested there was a need "To make its intentions
and requirements more widely understood. I don't know any of the
details of the scheme". Another suggested that "The
benefits of New Deal for employers need to be continuously marketed".
Yet another argued that "Small companies should be targeted.
We employ 40 people and would like to contribute, but it doesn't
quite seem accessible".
In the absence of appropriate information, employers are
likely to shun the New Deal. As one member commented, "The
whole scheme is a bit vague. I know little about it and I hesitate
to spend time trying to find out how it works". Similarly,
another stated that "With the exception of tv commercials
and the BBC news, I have received no information. This leads me
to believe that the whole idea is no more than a political gimmick".
2. POOR QUALITY
OF CANDIDATES
Another relatively common complaint made by respondents related
to the quality of New Deal recruits. Our research indicates that
employers are more likely to participate in the New Deal if they
are provided with "work ready applicants". However,
a number of respondents to our survey said that they were not
being supplied with employees of a sufficiently high standard.
One IoD member trenchantly remarked that "If we want new
employees we take the best available and retrain as necessary.
New Deal candidates are of the lowest quality and do not figure
in our employment strategy". Another respondent stressed
that "Candidates must be willing to participate! Experience
shows that half cannot be bothered to attend an interview".
One IoDmember suggested that the New Deal could be improved by
a "better screening of applicants, as the small involvement
we have had has resulted in totally unsuitable applicants who
either don't want to work for us, or more often just don't want
to work at all!"
Consequently, for a number of respondents to our survey the
key task of the Employment Service and other providers of the
New Deal is to get the unemployed participating in the scheme
ready for work during their period in the Gateway. For example,
one member suggested that "If clients in the Gateway were
to receive more structured training courses employers would be
more willing to take them on". Another proposed that "New
Deal recruits should receive customised training before being
offered to prospective employers". Similarly, another commented
that "Our experience of previous schemes for the young job
seeker is that they have been very poor. We need less jargon and
hype and more candidates who have the basic communication skills
and who are focused on what they want".
3. INSUFFICIENT SUPPLY
OF NEW
DEAL RECRUITS
While some IoD members bemoaned the deplorable state of the
unemployed people that they had come across under the New Deal,
other respondents complained that they simply could not recruit
a sufficient number of people under the scheme. One director reported
that "We tried during the summer of 1998 to fill two vacancies
under the New Deal. No candidates were forthcoming so we found
and took on two other unemployed people". Another respondent
recalled that "We did not receive one applicant in six months
with the New Deal". Yet another observed that "Very
few people seem to be available".
Clearly, the availability of New Deal recruits will vary
according to local labour market conditions. According to some
respondents to our survey, the supply of New Dealers in London
and the South East is particularly short. One IoD member observed
that "In London the problem seems to be finding enough people
who are available and able to benefit from the New Deal rather
than lack of employers". Likewise, another commented that
"The problem we face with the New Deal is that there are
very few people here in an area of record low unemployment (around
1 per cent) who are registered to work through it". Similarly,
another respondent noted that there were "No suitable candidates
available to start New Deal in the local area. We believe the
scheme is bogus. In the south of England there are only long term
unemployed people available, and most of them have no intention
of working. The majority of slack in the labout market has been
take up by recent economic growth".
As well as seeking to bring New Deal recruits up to an acceptable
standard for employers, then, the Government may need to consider
addressing the geographical imbalances that exist between the
supply of labour under the New Deal and the availability of employment.
Providing or improving transport links between such areas may
help to ameliorate this particular problem.
THE NATURE
OF DEMAND
Essentially the demand for labour is a derived demand because
no firm demands labour for its own sake. This creates an obvious
difficulty. Even if a jobs gap can be identified, what recourse
do policymakers have? Clearly there is not an intention to fill
a local level jobs gap by local level fiscal activism—via
higher expenditure or lower taxation. However, given that the
demand for labour is a derived demand, a mechanism would need
to be found to put more local money into more local pockets.
In order to boost the demand for jobs, one would need to
boost the demand for the goods and services of potential employers.
However, post-war experience at the national level shows that
activist fiscal policies have almost always failed, providing
at best only a temporary boom-bust expansion.
Moreover, even if a jobs gap could be identified, and targeted
fiscal activism undertaken at the local level, there would still
be serious doubts as to its effectiveness, owing to the potential
for leakage—either from goods/services produced/consumed
outside the area, or because of increased levels of saving. Clearly
local level fiscal activism is a non-starter. But if this is the
case, then the policy focus switches back to the supply side.
Defining the jobs gap catchment area is likely to be very
difficult. Experience in Greater London shows that areas of deficient
demand can be found immediately adjacent to areas of excess demand
for labour. If there are lots of vacancies in Hampstead and lots
of unemployed people in Camden, does this mean that there is deficient
demand in Camden? Any analysis of jobs gaps needs to consider
the demand for labour in immediately adjacent areas. As a result,
very useful information could be obtained by publishing local
level unemployment-vacancy ratios. The IoD suggests these local
labour market statistics should be made available.
CONCLUSION
To the extent that job gaps exist in the UK labour market,
the problem is invariably one of supply. Although the demand for
labour is indeed a derived demand, we can perhaps encourage employers'
predisposition to take on labour by keeping the costs of employment
low. The regulatory burden on business has increased by over £5
billion pa since 1997. Ultimately, this is not conducive to employment
growth.
Dr Richard Wilson
Business Policy Executive
Graeme Leach
Chief Economist
Institute of Directors
October 1999
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