Global Skill Shortages

Global Skill Shortages

Malcolm S. Cohen and Mahmood A. Zaidi

As the world entered the twenty-first century, global skill shortages in many occupations were evident throughout the world. While these were mitigated by a global recession, there is no generally agreed upon method for measuring these shortages. This book discusses various theories for measurement. Using data collected from 19 developed countries in North and Latin America, Europe, and the Pacific region, the authors explore various aspects of skilled labor shortages, develop a methodology of measuring shortages by occupation, and provide estimates of the likelihood of the occurrence of such shortages. They develop labor market indicators which measure the degree of shortage or surplus in different occupations.

Chapter 7: Coping with Skill Shortages

Malcolm S. Cohen and Mahmood A. Zaidi

Subjects: business and management, human resource management, economics and finance, industrial organisation, social policy and sociology, labour policy


This chapter discusses how companies have been coping with labour shortages. The success of a commercial enterprise in allocating its resources effectively is usually measured by its profitability. It is not surprising then to find that business decisions between possible alternatives are made with reference to the future. When a firm suffers from critical shortages of skilled workers (that is, when skilled workers are in high demand) it has to find ways to alleviate these shortages, first in the short term and then in the long term. Important determinants of labour force participation are age, gender, marital status and presence of children, wage rates and labour market conditions. Some of the strategies firms can employ to cope with labour shortages in the short term are the use of overtime, flexitime, outsourcing and immigration. OVERTIME Overtime is the employment of a worker for more than the standard working week. A firm can respond to an increase in demand either by hiring more workers or by increasing the hours of its present employees. To avoid the cost of hiring and training new workers a firm may consider increasing the working week in the short run. This means an increase in labour costs per unit of output since the overtime hours have to be paid at premium rates. This also has implications for current, as well as potential, output. FLEXITIME Flexitime is when, within some limits, the employee schedules his or her own hours of work. Flexitime in some occupations can increase job...

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