The Impact of High-Level Skill Shortages on Firm-Level Performance: Evidence from the UK Technical Graduate Labour Market

This paper uses data from the 1998 Technical Graduates Employers Survey, combined with post-survey financial data, to examine the effects of high-level skill shortages on firm-level performance in the UK. We focus specifically on enterprise difficulties in recruiting engineers and scientists with skills related to Information and Communication Technologies (ICTs). In contrast to most other surveys of skill shortages, these data distinguish clearly between external recruitment difficulties which are largely attributable to low numbers of job applicants and recruitment problems which are primarily due to shortcomings in the quality of job applicants.

Cross-sectional and panel regression analysis of the determinants of sales per employee at firm level suggests that quality-related difficulties in recruiting ICTskilled engineers and scientists do not have any statistically significant effects on performance. However, quantity-based difficulties in recruiting technical graduates with ICT skills are significantly negatively related to average sales per employee. The mechanisms by which unfilled positions for ICT-skilled engineers and scientists may contribute to relatively weak performance include slower development of new products and services, failure to meet delivery dates, higher costs of employing temporary and contract staff, loss of new customer orders and lack of forward planning.