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A theoretical review of skill shortages and skill needs

This publication, commissioned jointly with the Migration Advisory Committee (MAC), improves our understanding of the workings of the labour market and the ability of the labour market to meet the skill needs of employers. The analysis within this review will help inform the methodology used by the MAC to identify occupations that are considered to be skilled, suffering from shortages and which it would be sensible to fill through migration. It is recognised that where skill shortages exist, they are economically damaging, and that meeting employers’ skill needs is essential for economic success. Reducing skill shortages would contribute to the UK Commission’s ambition of raising prosperity and opportunity in the UK, both by enabling employers to operate with greater efficiency, and by helping individuals to access the opportunities available to them. And the Migration Advisory Committee (MAC) has been charged with identifying occupations in which shortages of skilled labour cannot readily be filled from within the domestic labour market, potentially justifying inward migration of individuals from outside the European Economic Area (EEA). This publication seeks to answer key questions about the existence of skill shortages and needs, and also explores how they can be measured.