7. Coping with skill shortages 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...
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