Are employers right about skills gaps – or are we overlooking perception gaps?

By Luke Bocock, NFER Research Director, and Sam Avanzo Windett, Deputy Director of the Learning and Work Institute

Monday 1 July 2024

This blog post was first published on the People Management website on June 25 2024. 

There is no shortage of research on the scale and severity of skills gaps in the UK costing billions to the economy, such as that by The Open University and Skills Builder.

Employers report a double skills gap: in technical skills and in the transferable ‘essential employment skills’ (EESs) that complement technical skills. Of these EESs, communication, collaboration, problem solving, decision making, information literacy, creative thinking and organising, planning and prioritising will be most in demand across the labour market by 2035.

New research for The Skills Imperative 2035, funded by the Nuffield Foundation, suggests that gaps in these skills are already widespread, with more than 10 per cent of workers having a substantial deficiency. Even more importantly, the proportion of workers with substantial EES deficiencies has the potential to nearly double by 2035, meaning up to seven million workers may lack the EESs they need to fully do their jobs – with consequences for both earnings and productivity growth.

Assessments of skills gaps have tended to rely almost entirely on the employer perspective, with minimal attention paid to the possibility that there may be a perception gap between employers and their employees. Our work on The Skills Imperative 2035 sheds new light on the missing worker perspective, using a new instrument to estimate workers’ EESs from their self-reported behaviours and comparing the skills they possess with the skills they perceive are required to do their jobs. These findings challenge the narrative that skills gaps are purely down to the lack of skills that employees possess. Instead, under utilisation of skills by some employers or the withdrawal of skills by some disaffected employees may also be factors.

While employers suggest that skills gaps increase as we move down the occupational hierarchy – from managers and directors at the top end, to workers in elementary occupations (eg warehouse operatives and window cleaners) at the bottom end – workers’ self-reported behaviours indicate the opposite. Our results suggest that professionals typically have skills deficiencies in relation to their EESs, but that skills under utilisation is more typical in the bottom half of the occupational hierarchy. This would mean employees in these occupations have skills that are being overlooked by their employers.

Of course, self-report data has known limitations; for example, some workers may underestimate their employers’ expectations or over report their skills. But there are other possible explanations too. What if businesses are failing to identify and fully harness the latent skills of workers in lower-level occupations? This could be the case if, for example, workers’ previous roles or personal lives have enabled them to develop and use these skills to a greater degree.

What if skills gaps emerge because workers are dissatisfied with their jobs? Existing evidence indicates that this could be caused by poor-quality employment resulting in reduced engagement, lower organisational commitment and reduced work effort, leading workers to withdraw their skills and employers to therefore identify skills gaps.

So, while employers are projected to increasingly suffer from skills gaps, they could also play a vital role in resolving them. HR and management practices are widely known to play an important part in aligning employers’ and workers’ perspectives. Research has shown skills gap agreement is more common in firms with regular performance reviews, extended job descriptions, formal channels through which workers are consulted on organisational change and which operate collective bargaining mechanisms and industry-level agreements. Line managers can also help unlock latent skills in the workforce by identifying and fully using the EESs workers possess.

Finally, businesses can minimise withdrawal behaviour: England has seen an increase in poor-quality jobs, characterised by low hourly pay and insecurity over working hours. Offering lower-paid workers greater security, flexibility and autonomy could be vital prerequisites for cultivating greater organisational commitment and minimising workers withdrawing their skills. 

Many, if not most, organisations will already be doing these things well, but every employer can still ask themselves ‘what more can I do to maximise the EESs of my workers? How can I help to harness and build creative thinking and organising skills across my workforce?’ for example. Above all, we need a collective response from across government, industry, the education system and wider society to address skills gaps in the current workforce. No employer can afford to be a passive observer over this next decade.