Unemployment, skills shortages and wages

Unemployment in South Africa has reached approximately 23.9 percent. There is absolutely no doubt that there is a critical skills shortage in our job market for specialist skills but could there be more to the the problem of talent for employers?

While we do not wish to extrapolate to South Africa from one of the worlds biggest economies, the UK, unemployment in Britain has reached 2.65m.  Employers in Britain, however, regularly bemoan the lack of skilled applicants.  A report recently released by the Chartered Management Institute (CMI) shows that employers are not offering sufficiently attractive financial offers to candidates and that is why they cannot attract or retain the staff they need.

The article below was originally published in the Telegraph:

Do skills shortages really exist when so many people are out of work?

Employers admit they are offering too little pay to attract the best workers for jobs - a key reason why they struggle to recruit staff aside from so-called 'skills shortages'. Skills shortages often take the blame when employers say they cannot recruit the right staff for available jobs. Businesses claim the education system is failing to produce “work-ready” candidates, while specialist, senior roles can go unfilled for months because of the so-called dearth of expertise.

But six in 10 employers admit they are turning away perfectly good candidates because they cannot afford to hire them, according to a new report from the Chartered Management Institute (CMI). The majority of companies surveyed said the salaries they offered hampered their ability to recruit the best staff, but would not increase wages amid the challenging economic environment, the study of 160 employers, covering 38,843 workers in the UK, revealed.

The report challenges the often-made assumption that there aren’t enough suitable candidates in the UK labour market, the CMI said. Pay was the second most frequently cited reason for recruitment problems, followed by competition from other employers, the location of their company and the benefits package they offered. Skills shortages were cited as the biggest problem, with 80pc of employers saying a lack of suitable candidates slowed recruitment, but the CMI said employers should try harder to attract the best workers.

Christopher Kinsella, acting chief executive of the CMI, said: “We understand that many organisations are still struggling to provide general salary increases due to recessionary pressures, but we urge employers to look to non-financial methods of rewarding good employees or risk losing them. The CMI study showed one in 10 managers quit their jobs last year – more than twice as many as the year before – as people felt increasingly undervalued and overworked in their roles.

Mr Kinsella said: “A company that does not work hard to retain its employees and invest in its people will find itself in a difficult situation given we already have a shortage of high quality managers.

“Strong managers are the lifeblood of effective organisations and too many employers are realising this too late.” More than 283,000 managers walked away from their jobs in the year to September 2011, despite unemployment reaching a 17-year high. Staff turnover for management roles, including those resigning, retiring, transferring internally and being made redundant, doubled to 20.3pc over the period, the CMI said. Half of companies said they were struggling to retain the right staff.

At the same time, six in 10 companies had problems hiring suitable people, up from half the year before.  Official figures on Wednesday showed there were 464,000 vacancies in the UK between December and February, with six unemployed people per available job. Average earnings growth in the year to February slowed to 1.1pc, the Office for National Statistics said, well below inflation. The CMI report showed managers took home an average pay rise of 3.1pc over the period, up from 2.2pc the year before.

Senior-level bonuses are now half as common as they were six years ago, with 44.2pc of directors and chief executives pocketing a bonus last year, possibly to drive down “excessive” pay, the CMI said. The average chief executive bonus was £103,754, compared to £5,326 for managers.

How serious are Britain’s skills shortages?

  • Half of companies want to take on more staff by 2015
  • But 45pc struggle to find the right candidates for jobs
  • One in five believe they lack the in-house skills to export
  • Two thirds rely on migrant workers to plug skills gaps
  • Just 10pc of firms feel confident hiring someone who has been out of work for six months or more

- Telegraph