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Adjusting to Skill Shortages: Complexity and Consequences

  • Healy, Joshua

    ()

    (NILS, Flinders University)

  • Mavromaras, Kostas G.

    ()

    (NILS, Flinders University)

  • Sloane, Peter J.

    ()

    (Swansea University)

Skill shortages are often portrayed as a major problem for the economies of many countries including the Australian economy. Yet, there is surprisingly little evidence about their prevalence, causes and consequences. This paper attempts to improve our understanding about these issues by using econometric methods to analyse the Business Longitudinal Database, an Australian panel data-set with information about skill shortages in small- and medium-sized businesses during 2004/05. We use this information to: (1) explore the incidence of skill shortages and the business attributes that are associated with them; (2) identify which businesses face more complex skill shortages, as measured by the number of different causes reported simultaneously; and, uniquely, (3) examine how this complexity affects businesses' responses to skill shortages and aspects of their subsequent performance. We show that complex skill shortages are more likely than simpler (single-cause) skill shortages to persist and to trigger defensive responses from businesses. We reject the conception of skill shortages as a homogenous phenomenon, and demonstrate the importance of distinguishing between skill shortages according to whether they have simple or complex causes.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6097.

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Length: 33 pages
Date of creation: Oct 2011
Date of revision:
Publication status: forthcoming in: Applied Economics, 2015
Handle: RePEc:iza:izadps:dp6097
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  1. Uschi Backes-Gellner & Simone N. Tuor, 2010. "Avoiding Labor Shortages by Employer Signaling: On the Importance of Good Work Climate and Labor Relations," ILR Review, Cornell University, ILR School, vol. 63(2), pages 271-286, January.
  2. Green, Francis & Machin, Stephen & Wilkinson, David, 1998. "The Meaning and Determinants of Skills Shortages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(2), pages 165-87, May.
  3. Michael Coelli & Roger Wilkins, 2008. "Are Skills Shortages a Constraint on Increasing Employment in Australia?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(3), pages 310-322, 09.
  4. Haskel, Jonathan & Martin, Christopher, 1993. "The Causes of Skill Shortages in Britain," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 573-88, October.
  5. Haskel, Jonathan & Martin, Christopher, 1993. "Do Skill Shortages Reduce Productivity? Theory and Evidence from the United Kingdom," Economic Journal, Royal Economic Society, vol. 103(417), pages 386-94, March.
  6. Haskel, Jonathan & Martin, Christopher, 2001. "Technology, Wages, and Skill Shortages: Evidence from UK Micro Data," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 642-58, October.
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