“Many UK employers have had to pay ‘well above market rate’ to attract employees

over the past year as a skills shortage intensifies.” – BBC, 3 July 2017.

By -3 JUL 2017

Research by the Open University claims that a “skills gap” is costing UK businesses more than £2bn every year.

Employers are being forced “inflate salaries to attract talent above market rate,” in order to attract the right talent, it says.

The claims have been picked up across the media, including the BBC and several newspapers. But we have a few concerns.

Reliable research?

The findings are based on a survey of 400 businesses conducted by the Open University.

But this was not actually an academic study, written or peer-reviewed by qualified academics.

The Open University outsourced its study to a private market research company based in York, called Pickersgill Consultancy & Planning Ltd.

The university has not released a full-length report with workings and analysis. When FactCheck asked the Open University to provide the full research report, we were sent a press release with fewer than 1,000 words.

There is a lot of important detail missing. How were the companies selected for the survey? What specific questions were they asked? And, if employers are having to exceed the “market rate” for salaries, what is their definition of “market rate”?

The market research company told us their survey covered multiple sectors and was spread across the UK. Around one in five of the businesses surveyed were in the health or education sector, while more than a third were in the broad category of “professional services” (including law, marketing and IT).

Only seven per cent were manual labour sector businesses.

‘Market rate’?

The claims say that employers are having to increase salaries to above the “market rate”. But what does that mean?

The Cambridge English Dictionary defines the term “market rate” as: “The amount of money that something costs at a particular time.”

So if the cost of labour increases then the new cost is, de facto, the “market rate”.

We don’t know really know what the Open University (or the media organisations who repeated the claims) mean when they talk about being “above” this rate.

Given that this is not an academic study, we think it’s most likely that all they are actually showing is that employers are having to pay their workers more money than they would ideally like to.

We can’t be sure exactly though, because the Open University have not released its full methodology.

Is there really a skills gap?

There’s no definitive way of measuring a “skills gap”, so we can’t give a completely concrete answer on this. However, we need to distinguish between skills and recruitment issues, as they are often conflated.

In theory, there could be an abundance of people with the necessary skills – but the jobs these businesses are offering are simply not good enough to attract them.

As a whole, the UK labour market is likely to experience both skills and recruitment problems to a certain degree.

Dr Thijs van Rens, associate professor in the Department of Economics at Warwick University, told FactCheck the situation is more complicated than many commentators like to make out.

“There is genuine confusion about what a ‘skills gap’ means,” he said. “There are some skills or occupations where there is a lot more demand than supply, and others where there is a lot more supply than demand. So, in that sense, the skills gap is not a myth. It’s a real thing.

“But calling it a skills gap would suggest that these skills are not at all available, and that is – as far as we know – not the case. There are skills shortages, but then the next question is why do they exist and why do they persist? And the answer tends to be because of wages.”

He added: “Everyone seems to agree that, if there is a skills gap, then we need to do something about it in terms of training and education. But that is not at all clear – it is also about wages.”