There’s a global skills shortage. What’s causing it and how can companies not only attract the best of the best but retain them too?
Companies across the globe are facing problems with recruitment and retention, caused by a host of reasons, from skills shortages and employees’ changing attitudes towards work to Covid and low birth rates during the 2008 recession.
Around mid-2021, headlines about the Great Resignation started appearing in newspapers around the world. After more than a year of lockdowns and Covid restrictions, employees were rethinking their careers and started making changes accordingly. Many were looking for more flexible working conditions as well as a better work-life balance. Now, more than a year later, research suggests that companies’ difficulties around recruitment and retention are far from over and might be here to stay for the foreseeable future.
Looking at the hard figures, global skills shortages reached a 16-year high this year, as 3 in 4 employers reported difficulties in finding the talent they need. Data by ManpowerGroup shows that talent shortages stood at only 30% in 2009 but has since steadily grown with the steepest rises in the past five years, reaching 45% in 2018, 54% in 2019, 69% in 2021 and 75% this year.
With reported skills shortages of 76%, education, health & government; IT & technology; and manufacturing are the three sectors with the highest shortages. This is followed by banking & finance and wholesale & retail trade (each at 75%), restaurants & hotels (74%) and construction (72%).
While the global average talent shortage stands at 75%, Manpower Group found significant differences across the 40 countries it surveyed. The highest shortages were found in Taiwan (88%), followed by Portugal at 85%.
Overall, businesses in North America and Europe have lower talent shortages than organisations in the Asia Pacific region: Canada at 77% and the US at 74%. In Europe, Romania is the country with the highest shortage, at 82%, while the Czech Republic has the lowest shortage of all countries surveyed, only 49%.
A myriad of developments is causing a global skills shortage
There are several reasons for the global skills shortage. Older generations are leaving the workforce – something that has been accelerated by the pandemic – while many of the younger generation still lack the managerial experience or skills necessary to fill the roles left by their older colleagues. Additionally, the rapidly evolving technologies of today are constantly changing many job roles, requiring highly specialised skills and knowledge. Combine that with employees now expecting better pay, more flexibility and a better work-life balance and it creates the perfect storm within talent recruitment and retention. And it’s not set to improve any time soon.
Over the coming years, we will start to see the consequences of the decline in birth rates that occurred during the 2008 recession. Birth rates fell from a peak of 2.12 births per woman in 2007 to 1.8 in 2016 in the US, according to figures by the World Economic Forum. For some European countries, such as Greece and Spain, the fertility rate dropped from 1.5 to around 1.3 over the same period. This will result in fewer people entering the job market and higher education than was the case in the past.
In the US, college and university enrolment are already in decline, with one million fewer students enrolling in 2021 than in 2019. Young people more often forego further education due to the high availability of jobs and the impact of Covid-19 on in-person classes. But even if plenty of students graduate with a higher education degree, students are not graduating with the skills employers say they need. A better alignment between higher education courses and the skills and knowledge required by the labour market are therefore needed.
Changing attitudes towards work
Once employers succeed in attracting the right talent, the work does not stop there. Retention is just as important, especially in today’s market where employees are much more likely to change jobs.
According to data by GWI, 40.5% of Gen Z (between 16-24 years old) are very likely or somewhat likely to search for a new job within the next 6 months. This makes Gen Z the generation with the lowest job loyalty, although many millennials (between 25-38 years old) are also considering switching jobs: 34.3% said they were very or somewhat likely to search for a new job. Among Gen X (between 39-57 years old), this figure stood at only 27.1%.
Source: GWI Work, Q2 2022
The importance of an investment and reskilling plan
What can companies do to retain their staff? As discussions about returning to the office and flexible working continue, GWI’s research shows that employees from all working generations appreciate flexibility: 48.6% of millennials, 46.1% of Gen X and 44.5% of Gen Z would like to see more flexible working. Unsurprisingly, workplace safety is also key for all three groups, while around a third of millennials and Gen Z would like to see more investment in technology.
Evidence suggests that companies are already acutely aware of the importance of employee retention. Data by GWI shows an increase in company benefits such as company-funded trips, free drinks at work, free tickets to special events (e.g. conferences), unlimited paid time off and performance-related bonuses between Q1 of 2019 and Q3 of 2021.
At the same time, the three generations in the workplace report a decrease in other company benefits offered, such as life insurance, medical cover, additional pension contributions and tuition reimbursement. Nonetheless, the percentage of employees who receive none of these benefits at all has decreased significantly during the period. Whereas in Q1 2019, between 14% and 17.5% didn’t receive any of the company benefits prompted, this had dropped to between 6.7% and 12% in Q3 2021.
While offering additional or more generous company benefits can be part of an effective recruitment and retention programme, companies will have to do more to be successful employers in this challenging market.
One of the most important employee retention tools is training and career development. A 2018 LinkedIn Learning report indicated that 94% of employees would stay at a company longer if it invested in their career. And the World Economic Forum’s Future of Jobs Report 2020 found that 50% of all employees need reskilling by 2025. It is therefore advisable for companies to build an investment and reskilling plan for their workforce as well as career road maps for individual job roles.
Other avenues available to companies looking to attract and retain the best talent are to expand their hiring to include non-traditional pathways and to consider recruiting and rehiring boomerang employees who already know the company and have the skills and knowledge required.
In a world where attracting and retaining the right talent is likely to remain challenging for the foreseeable future, companies need to take proactive steps to protect their business from a potential skills shortage in future.
Our specialist team, Fundamental L&D, works with a number of high-profile financial clients, creating and establishing their employee brand strategy. We offer a deep dive into your current talent acquisition and retention strategy in order to create a bespoke roadmap that will help solve your talent challenges in any global territory.
For more information, including case studies, please speak to Sarah Fearnley-Whittingstall, Managing Director of Fundamental L&D.