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SMEs suffering due to "growing mismatch" with labour market

Mind the gap. It’s a message that is being increasingly aired in the world of work, with growing fears about a widening skills gap in Europe and beyond

By: EBR - Posted: Monday, August 5, 2019

Experts from McKinsey and PWC estimate that between 30-50% of jobs will become the preserve of robots and AI in the next decade so what skills should we be training and developing?
Experts from McKinsey and PWC estimate that between 30-50% of jobs will become the preserve of robots and AI in the next decade so what skills should we be training and developing?


By Martin Banks

Mind the gap. It’s a message that is being increasingly aired in the world of work, with growing fears about a widening skills gap in Europe and beyond. Labour markets are changing, due to technological advancement, greening, and ageing workforce. Skills shortages and the mismatch with labour market needs is a serious matter, not least because it hampers SMEs’ productivity and growth.

The future of work is rapidly changing. With the rise of machines and automation, we need to empower our workforces with 21st-century skills to help them remain employable. But how do we empower billions of people who may have never set foot inside a classroom? How do we give them universal access to education and enable them to be future-ready?

There have been warnings in the past about skills gaps and weaknesses in vocational training but the difference now is that employers are increasingly complaining about a widening skills shortage.

Research by the Open University claims that in the UK alone a “skills gap” is costing businesses there more than £2bn every year. Elsewhere, a new edition of the European Commission’s Employment and Social Developments in Europe (ESDE) Quarterly Review said a combination of labour shortages in some member states and the lack of growth in others is slowing down EU employment rate growth overall. This points to geographical and skills mismatches on the labour market, it cautions.

The report comes amid concern about a growing skills gap in Europe and elsewhere. Alexey Likhachev, Director General of Rosatom, the leading nuclear energy company, is among those who have voiced concern. Writing recently in the French Les Echos, he called for an expert task-force to be set up to address “the creeping global skills crisis.” He says the issue is a problem of comparable gravity to climate change but one which “has been blithely batted away as peripheral by top policy-makers across the world for too long now. “In a decade or so from now, when the last of the baby-boomers ride into the sunset with no replacement in sight, the void left behind is not only likely to be a threat to economic growth but worse still to human lives,” he wrote.

As we usher in the ‘4th Industrial Revolution’ the focus on skills development in the workplace, and in particular the demand for soft (or transferable) skills, has perhaps never been higher. It is clear that one of the biggest challenges we are facing globally today is how to close the rapidly growing skills gap.

Experts from McKinsey and PWC estimate that between 30-50% of jobs will become the preserve of robots and AI in the next decade so what skills should we be training and developing? The World Economic Forum, in a report “The Future of Jobs”, provides a clue in its list of the 10 skills needed to thrive in the 4th Industrial Revolution. This top 10 can be simplified as the 4Cs: critical thinking, creativity, communication and collaboration.

Crafts and SMEs in Europe which, due to the digital and green transformations are already facing a serious skills gap and mismatch in the labour market, are eagerly looking for skilled staff. SMEunited is the association of crafts and SMEs in Europe with around 70 member organisations from over 30 European countries. Its president Ulrike Rabmer-Koller told this website: “SMEs are, by far, the main source of jobs in Europe. They drive social progress and strongly contribute to social cohesion and inclusive labour markets at local level. However, Crafts and SMEs are suffering from skills and labour shortages due to a growing mismatch with the labour market needs.” She adds, “Skills shortages and adapting to digitalisation are the current biggest challenges for the majority of SMEs. We call for more efforts at all levels to tackle upskilling and reskilling of a workforce that is lacking the necessary digital skills to remain on the labour market.” Rabmer-Koller argues that Vocational Education and Training (VET) and on-the-job learning are the best responses to the current and future labour market skills needs.

There is also the often-heard argument that migrant workers can help fill skills shortages in European labour markets although, with many member states reluctant to take in any more migrants, this is unlikely to address problems such as insufficient numbers of young people wanting to enter the fields of science and engineering. As a response to this particular shortage, companies, universities and schools are trying to make science careers more enticing. In a study, “The Global Skills Gap: Student Misperceptions and Institutional Solutions”, the QS Intelligence Unit (QSIU) says there is a need for better quality data on this issue. It says, “Hitherto, skill surveys have created a picture of what competencies companies expect from their graduates. The next research step will involve regular feedback from those companies so as to provide universities with a clearer picture of the relationship between their teaching practices and their graduate skill sets.”

Some companies, meanwhile, are committing more and more money to tackle skills shortages. JPMorgan Chase, for instance, plans to commit $350 million to curbing the global skills gap and preparing workers for higher skill job opportunities. Its “New Skills at Work” initiative, a five-year plan that builds on a similar $250 million investment announced in 2013, aims to improve worker skills and develop new training programmes. "The new world of work is about skills, not necessarily degrees," said Jamie Dimon, JPMorgan Chase CEO, adding, “Unfortunately, too many people are stuck in low-skill jobs that have no future and too many businesses cannot find the skilled workers they need.”

Dimon is among those business leaders who, in recent years,have lamented a perceived skills gap in the U.S. and throughout the world. Some have suggested students from high schools, community colleges and universities are not entering the workforce with the types of skills employers need.

With the debate on workplace skills, and the role of universities in helping students to develop skills – particularly ‘soft skills’ - firmly in the spotlight, the time could be right to consider the role of the “UK Engagement Survey” (UKES) as a tool for benchmarking student skills development. UKES is the only nationwide UK undergraduate survey to focus on student engagement and its spokesman said that while, understandably, there is intense focus on skills, employer needs and equipping graduates for the world of work, it is equally feasible to use UKES alongside other student engagement surveys to compare HE systems across the world more broadly.

Elsewhere, the Institute of Student Employers, in its “Global Skills Gap 2019” report says the graduate skills gap is a “global and widespread” issue. Stephen Isherwood, CEO of the ISE, states, “These skill gaps exist across regions, countries and firms of varying sizes. Bridging these gaps is a key step towards a more productive workforce. The pace of change in the workplace is ever increasing so graduates need to ensure they are developing the skill and abilities that will not only empower them to land the job of their choice, but also allow them to thrive as their career develops.”

His comments are partly echoed by Dr Thijs van Rens, associate professor in the Department of Economics at Warwick University, who also warns that the situation is more complicated than many commentators like to make out. “There is genuine confusion about what a ‘skills gap’ means,” he said. “There are some skills or occupations where there is a lot more demand than supply, and others where there is a lot more supply than demand. So, in that sense, the skills gap is not a myth. It’s a real thing.

“But calling it a skills gap would suggest that these skills are not at all available, and that is – as far as we know – not the case. There are skills shortages, but then the next question is why do they exist and why do they persist? And the answer tends to be because of wages.” He added: “Everyone seems to agree that, if there is a skills gap, then we need to do something about it in terms of training and education. But that is not at all clear – it is also about wages.”

Most, though, agree that we are living in more complex, uncertain times, in an age where humans and tech are learning how to interact with each other. What is also clear is that we are running out of time to develop 21st-century skills and mindsets and close the growing employability gaps.


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