The Hays Global Skills Index 2012In partnership with:
The Hays Global Skills Index 2012 | 2 The Hays Global Skills Index 2012 | 1An introduction by Alistair CoxChief Executive, Hays plcIt gives me great pleasure to introduce the Hays Global Skills Index 2012,our first ever in-depth review of global skills and employment trends,produced in collaboration with Oxford Economics. The availability andflow of skilled labour is a critical measure for employers, employees andgovernments around the world. Skill shortages restrict economic growthand investment while unemployment is not only an economic burdenbut also brings distress and hardship to society. There is already a greatdeal of commentary around these issues. However, to better inform thedebate, we have aimed to shed light on what is actually happening intoday’s markets around the world, looking at a range of data to outlinethe issues in 27 key countries.What our report demonstrates is that there is a major paradox in theworld’s skilled labour markets today. We are witnessing high and chroniclevels of unemployment in many areas, while simultaneously seeingindustries and countries struggle to find enough highly skilled individualsto fill the opportunities already available. Global shortages already existin areas such as engineering, energy production, infrastructuredevelopment and healthcare and it is highly unlikely that theseshortages will be resolved in the near future. Indeed they may well getworse as many countries are simply not educating, or proactivelyattracting, the people they need to fuel their growth.At the same time, we see significant levels of unemployment in manycountries, including those struggling with skill shortages in certainindustries and roles. This is of particular concern where we see largenumbers of long-term unemployed or high levels of unemploymentamongst under-25’s as both are difficult situations to address.Ironically, the world currently seems short of the very skills thatwould help stimulate economic growth and provide opportunitiesfor the unemployed.There is no one single factor causing these imbalances. Rather, it isa combination of factors such as the economic situation, educationsystems, labour market flexibility and government policy that eitherrestricts or resolves the matching of skills to opportunity. Here in Hays,we see the impact of these factors every day in our work: helpingorganisations find the talent they need in a world where theircompetitors are looking for the same, scarce people. Certain companiesand countries are adopting different ways of dealing with this, includingsome very innovative ideas. However, not everyone is tackling thesituation effectively, so there will be winners and losers.The world has had to deal with very serious economic and social issuesover the last five years and still feels very fragile. It is understandablethat we see dislocations in the market after such a series of deep shocks.However, as parts of the world start to return to tentative growth, it isimportant that the labour market imbalances we are already seeingstart to be addressed. The alternative is that organisations and countriesfail to deliver the growth that should be achievable, investment isrestricted, wage inflation takes off in certain sectors and we continue tosee high levels of unemployment in others.As a result of our research therefore, we propose a three-point actionplan for employers, governments and international bodies to considerin order to better develop local skills as well as easing the internationalflow of labour from areas of surplus to ones of shortage. These are notshort-term measures designed to fix the problem overnight. However,they are key principles which we argue are relevant to every country inthe report. Equally, the data in this first report is a snapshot of the worldat a certain point in time. Markets change frequently so we expect tosee shifts in the detail of labour imbalances as sectors evolve and reactto the world they operate in. We aim to conduct this research annuallyto highlight these changes. However, some of the key themes aroundcreating a system that allows better development and flow of skilledlabour will remain constant.Finding the right person for a job can transform a business, as wellas that person’s life. That’s a fundamental belief in Hays. Playing a partin helping resolve the current global skills mismatch we see every dayall around the world is important to us. That journey starts by publishingour data on what is actually happening in the skilled labour markets allaround us right now. Hopefully, this data helps policymakers andbusinesses to start to put in place the measures required, whatever theymay be. Fixing this problem will create more jobs, stimulate economicgrowth and provide meaningful opportunities for millions of people.ContentsIntroduction 1Executive Summary 2Creating the Hays Global Skills Index 3THE Hays index by country 4Three-point Action Plan 5The Global Picture 6 Economic health and fragility 7 Education and the labour market 7 Talent mismatch and wage pressure 8 Shortages in key industries and occupations 8THE REGIONAL PICTURE 10 Europe 11The euro area 11Western Europe outside the euro 12Eastern Europe and Russia 13 North America 13 Latin and South America 15 Asia 16 Australia and New Zealand 18Sources 19Contributors 20The Hays Global Skills Index results 22 Global map 22 Country-by-country results in detail 24The Hays GlobalSkills index 2012
2 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 3Executive Summary Creating the HaysGlobal Skills IndexThe Hays Global Skills Index represents a standard model for assessing the key factors that contributeto skills shortages in any country. These factors include the strength and resilience of an economy,the health of a country’s labour market, the quality and flexibility of education, and the demand andsupply of labour (particularly in high-skill industries and occupations).Seven components make up theHays Global Skills Index• Education flexibility. Measures whether the education system can adaptto meet organisations’ future talent needs, particularly in the fields ofmathematics, science and literacy. A high score means there is limitedpotential or capacity to increase education performance and output. Alow score indicates there is considerable scope to expand the outputand quality of the local educational system.• Labour market participation. Measures the degree to which a country’stalent pool is fully utilised. A high score means that the proportion ofworking age people that are employed (or are available for immediatework) is not increasing, indicating constraints on the availability ofadditional resource. A low score means that the participation ratereflects the increasing availability of talent to join the workforce.• Labour market flexibility. Assesses the legal and regulatoryenvironment faced by businesses. A high score means the labour marketlegislation is judged to be inflexible and there are constraints on theability of inward migrants to fill talent gaps. A low score means thelabour market legislation is judged to be flexible, with an openness toimmigration.• Talent mismatch. Measures the mismatch between the skills needed bybusinesses and skills possessed by the labour force. A high score meansthat the numbers of long-term unemployed and vacancies are bothincreasing suggesting the available labour does not have the skillsemployers want. A low score implies that employers are having an easiertime finding the talent they need.• Overall wage pressure. Whether wages are keeping pace with inflation,which is a measure of overall labour market tightness. A high scoremeans real wages are increasing quickly relative to the longer term.A low score means real wages are not rising quickly (or are evendeclining) relative to the longer term.• Wage pressure in high-skill industries. The rate at which wages inhigh-skill industries outpace those in others. A high score means wagesin high-skill industries are rising much faster than in low-skill industries.A low score means wages in high-skill industries are not rising fasterthan in low-skill industries.• Wage pressure in high-skill occupations. A measure of wage premiumpaid in high-skill occupations, which is an indicator of shortages of keytalent. A high score means wages in high-skill occupations are risingfaster than in low-skill occupations. A low score means wages inhigh-skill occupations are not rising faster than in low-skill occupations.These seven criteria are all given equal weighting.Each country’s Hays Index is surrounded by a coloured dial indicatingthe score ranges for the seven labour market indicators.The global economic downturn has led to sharp rises in unemploymentaround the world, particularly in North America and Europe. However,there is little evidence that this has led to an easing in skills shortages.Indeed, evidence seems to point to a worsening of the situation.To examine this issue, we collaborated with Oxford Economics to designthe Hays Global Skills Index 2012 (the ‘Index’) which shows the state of themarket for skilled labour in 27 key economies across all five regions of theworld. This data is published for the first time in this report.The Index gives each country a score between 0 and 10.0, where a scoreof 5.0 indicates a stable and balanced market for skilled labour in whichcompanies are neither experiencing recruitment and retention problems,nor are they witnessing a weak demand for labour. Scores higher than5.0 indicate companies are witnessing a degree of skills shortage, whichmay lead to adverse consequences including wage inflation for example.Scores lower than 5.0 indicate a slack labour market where skilled workersexperience difficulty in finding employment.Clearly each country and industry sector face their own issues so the datamust be looked at in detail for each circumstance. However, there areimplications for every country in this study. 16 of the 27 countries arealready experiencing some degree of labour market tightness, as shownby a score of 5.1 or higher. The greatest difficulties are seen in the UnitedStates and Germany, both on a score of 6.4. Hungary and Sweden are notfar behind with a score of 6.1. Many of the countries with a score below5.0, indicating a slack labour market, are in Europe. This is maybe to beexpected as these countries struggle with the continuing sovereign debtand banking crises in the Eurozone.To determine the Index for each country, we took account of a numberof factors including wage pressure (both overall and by industry sectorand profession), talent mismatch for available roles, and those factors thatcontribute to skill shortages such as the quality of local education andlabour market flexibility. Strong economies tend to generate wagepressure, and the strength of demand further tightens the local labourmarket. However, talent mismatch, where companies struggle to recruitthe skills they need despite a large pool of available labour, is currently amajor issue for countries such as the US, UK and Ireland, even thoughwage pressures there are weak. This should act as a warning of furtherlong-term skill shortages as these economies eventually recover anddemand grows further for these skills.When looking specifically at high-skill industries, half of the countriessurveyed are currently experiencing levels of wage pressure indicativeof skills shortages. These countries are a mix of emerging nations,predominantly in Asia, as well as certain developed economies, indicatingthat wage inflation is usually a country-specific or sector-specific issue.Skill shortages by occupation and experience level vary considerablyacross countries. The US has the highest reading of all the countriessurveyed and is close to the maximum possible in the Index. This suggestsa severe dislocation between employers’ needs and the supply from theeducational and vocational training systems in place. Singapore alsowitnesses wage inflation in high-skill occupations but has alreadyimplemented far-reaching immigration systems to respond to thispressure. At the opposite end of the spectrum, those countries mostheavily impacted by the Eurozone crisis show very little pressure onwages, notably in markets such as Italy.Regional analysis based on Index data and local input from Haysexecutives shows that skills shortages are already a major issue foremployers in many countries and sectors, and that the situation is likelyto worsen without specific action taken by governments and businesses.• Europe can be divided into three areas. Eurozone countries,particularly those in the south are experiencing low stress levels inskilled labour. However, high unemployment in these areas creates itsown social difficulties. Fast growing countries outside the Eurozone,including Switzerland and Sweden, are currently experiencing wagepressure. Other countries such as the UK suffer a severe talentmismatch while simultaneously struggling with high unemploymentlevels. In emerging Europe, Russia faces the twin difficulties of adeclining and ageing workforce, combined with a growing need forstaff with international experience or skills to support local businessesseeking to expand overseas.• In North America, the US has the highest score in the Hays Index,indicating one of the tightest markets in terms of skilled labour.Shortages are particularly evident in sectors such as oil and gas, lifesciences and information technology. Paradoxically however, the US isalso witnessing stubbornly high levels of unemployment within a weakeconomic recovery. This can be explained by an excess supply of semi-and unskilled workers who are not suitable for the sorts of roles that arebeing created by the industries that are currently generating economicgrowth in the US. Canada faces similar issues with acute shortages inthe natural resources sector in particular.• Across Latin and South America, there are widespread skillsshortages in many sectors including natural resources, engineering,life sciences, retail and finance. These problems are compounded bythe relative inflexibility of local labour markets as well as languagerequirements which restrict the ability to attract talent from overseasto fill the many roles currently available.• In Asia, although economic growth is fuelling wage inflation, relaxinglabour market and immigration systems would go some way toalleviating this pressure. And whilst the quality of the education systemcan vary across Asia, schools and universities in countries such as China,India and Singapore have scope to expand their education performanceand output to meet organisations’ demands for specific skills.• Australia and New Zealand both face skill shortages in specific sectors,but for different reasons. Demand for highly skilled professionalsremains high in the natural resources sector of Australia and this is thekey driver of current labour market tightness there. In New Zealandthere is a very significant demand for qualified civil engineers, andother professionals in the construction sector, to undertake therebuilding of Christchurch after the earthquake of 2011 – this is havinga profound effect on employment in this sector.Overall, very few countries currently enjoy a labour market where all sevencomponents are in balance. Even amongst those with weak economies,several are witnessing shortages in certain sectors. As economies repairover time, growing demand will exacerbate the problem, driving furtherwage inflation in specific sectors. Certain countries will successfully tapinto the talent that is available globally and facilitate the free movement ofthat labour toward their own industries. Others will likely maintain morerigid labour policies and witness greater levels of unfilled roles, whilepotentially maintaining high levels of unskilled unemployed.5.1EducationﬂexibilityLabour marketparticipationLabour marketﬂexibilityTalent mismatchOverall wagepressureWage pressurein high-skillindustriesWage pressurein high-skilloccupationsLOW PRESSURE HIGH PRESSURE0.0-0.9 4.0-4.9 8.0-8.93.0-3.9 7.0-7.91.0-1.9 5.0-5.9 9.0-9.9 10.02.0-2.9 6.0-6.9Given that skills shortages relate to the complex interaction of all thesefactors, we collaborated with Oxford Economics (OE) to construct theHays Global Skills Index, which aims to help employers, employees andpolicymakers understand the dynamics of their labour markets, and tomake comparisons across geographies.The Hays Index is based on an aggregation of thousands of individualdata points by Oxford Economics (see page 19) that builds a picture ofthe friction levels in a country’s labour market. Each country’s HaysIndex is displayed in colour-coded circles surrounded by indicatorsrelating to the seven components that make up the Index (seedescriptor below).We have displayed the results of the Hays Index in a large, fold-outinfographic map at the back of this report, which we plan to updateeach year.The analysis that follows in this report is supplemented by detailedlocal knowledge and insight from senior Hays executives workingon the ground in the four geographies that Hays operates: Europe,The Americas, Asia, and Australia and New Zealand.The Hays Index illustrates specific areas currently affected by skillsshortages as well as highlighting sectors and occupations that may seerestrictions in the coming years. This enables us to draw out key policyissues for governments, international bodies and multinationalcorporations to consider when designing their long-term strategies,reflected in the three-point Action Plan that follows on page five.
4 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 5The Hays Index ranges from 0 to 10.0 where a score of 5.0 indicatesa generally balanced picture for labour markets. This suggests firms areable to recruit, retain, or replace their key talent at generally prevailingwage rates. A score close to 0 indicates intense competition for keyvacancies. A score close to 10.0 indicates severe difficulty in finding theright skills to fill key vacancies.More than half (16) of the countries are experiencing some degree oflabour market tightness with a score of 5.0 or higher. As the Hays Indexis based on an aggregation of scores for the seven components, thebreakdown of each country’s Hays Index reflects the specific dynamicsof the local labour market.The greatest difficulties were found in the United States and Germany,both with a score of 6.4, followed by Hungary and Sweden on 6.1, whichreflects the difficulties faced by many organisations in filling skilledvacancies in these countries.Many of the geographies with scores below 5.0 – reflecting a lax labourmarket with high competition for vacancies – were in Europe. This islikely to reflect the impact of the on-going sovereign debt crisis in theEurozone, and the low levels of talent mismatch.Although the average score of all the 27 countries is 5.1, there is a widedivergence of scores for each of the seven components that makeup the Hays Index within each country. This indicates that the labourmarkets of the world’s major economies are faced with a specific mixof tight and lax labour market influences that impact hiring conditionsin different ways in each country.Hays’ three-point action plan1. Governments must have clarity on the skills that arerequired and look to attract those specific skillsOnce the workers with these skills are identified governmentsneed to make the processes to employ them quicker and easier.One of the principal causes of the imbalance in the global skillsmarket is the very real obstacles that employers and employeesalike face from immigration systems. We believe that governmentscan help by both simplifying and standardising the work visaprocesses for skilled workers and, critically, by speeding upapplication times. Specifically we suggest:• International agreement on a priority skills visa process,whereby qualified individuals with priority skills shouldbe granted fast-track status.• An international standard for a work visa applicationof 30 days once submitted.• Longer and more easily renewable visas for skilled individuals toprovide both them and their employers with greater security ofcontinued visa status.2. Employers should be offered fiscal incentives to increasetraining provisionAll responsible employers offer a significant amount of vocationaltraining. For most this is a sunk cost; they provide expensivetraining with no guarantee that the employee will stay with themfor any length of time. Indeed, if they provide training in anyShortage Skills, they take the risk that it may accelerate anemployee’s departure to a better paid post elsewhere. We believethat employers should be offered tax incentives to providetraining, accredited to an agreed standard and following agreedcurricula. These incentives could be made more generous for theprovision of training in Shortage Skills, such as engineering andfast developing industries such as green energy.3. Governments to work with employers to draw up strategicplans to increase the provision of education in Shortage SkillsIt is clear from our report that whilst many graduates are outof work, particularly in Europe, at the same time the world ischronically short of particular skills. This is policy failure on a majorscale and suggests there is a disconnect between higher educationbodies, employers and undergraduates about the skills andtraining now needed in the workplace. We suggest:• Governments to provide colleges and universities with fiscalincentives to increase the provision of Shortage Skill training,establishing measures to ensure the quality and relevance of thecourses are appropriate.• Employers to build greater links with colleges and universitiesto communicate their specific needs for skills and improve theiroutreach into schools to explain the attractions of specific careerchoices. Governments need to be involved in this process and drivethe agenda to ensure success.• Colleges (backed where necessary by grants) to offer studentsfinancial incentives to enrol in specific courses, such as reducedfees or bursaries.We recognise that different governments, companies and institutionspursue a combination of all three of these initiatives to somedegree. However the overall picture shows these measures are notsufficient and activity needs to be increased and be betterco-ordinated.Throughout the report are specific examples of actions that arebeing taken by governments that either help resolve these issues,or in certain cases actually make them worse.Three-Point action planWhile all 27 countries in the Hays Global Skills Index suffer from individual labour market pressures,the analysis highlights two common significant issues that need to be addressed by governmentsand businesses alike to maximise future economic growth.• There is a chronic and significant imbalance of key skills around theworld. This is exacerbated by inflexible labour and immigrationlegislation in many jurisdictions. This requires policy changes tostimulate greater labour mobility from areas of surplus supply toareas of greatest demand.• Some of the most critical and important skills for driving economicgrowth (The ‘Shortage Skills’) are in shortage on a global basisi.e. in engineering, infrastructure development and healthcare forexample. These need to be addressed to focus the workforce oftomorrow on the roles in demand.To address these issues Hays proposes a comprehensive three-pointaction plan for governments, businesses and international organisationsto consider.THE Hays indexby countryThere is a wide range of dynamics impacting the skilled labour market conditions across the27 leading developed and emerging economies that make up the Hays Index.Hays Global Skills overall Index scoresUnited StatesSwedenBelgiumItalyHong KongIndiaNetherlandsDenmarkIrelandFranceCzech RepublicNew ZealandUKSingaporeRussiaPolandPortugalJapanSwitzerlandSpainChinaCanadaBrazilMexicoAustraliaHungaryGermanyAverage184.108.40.206.220.127.116.11.54.64.85.05.18.104.22.168.22.214.171.124.126.96.36.199.188.8.131.52.1The analysis on which the Hays Global Skills Index was based utiliseddata as of Q3 2012. Developments subsequent to this date are notreflected in the 2012 findings.LOW PRESSURE HIGH PRESSURE0.0-0.9 4.0-4.9 8.0-8.93.0-3.9 7.0-7.91.0-1.9 5.0-5.9 9.0-9.9 10.02.0-2.9 6.0-6.9
6 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 7The global pictureEconomic health and fragilityWhile economic data are not of themselves indicators of labour marketconditions and are not part of the Index, they are an important contributorto how demand for labour will develop. It is therefore important toconsider the wider economic backdrop, both in terms of current healthand also of future vulnerability to shocks.Our assessment confirms a commonly held view of a world dividedbetween relative weakness among the rich countries, and especiallyin the Eurozone, and strength in the emerging economies. The worsteconomic conditions were in Ireland, Portugal, Italy and Spain, countriesthat have been subject to bailouts or that are seen as vulnerable to theeuro crisis, along with the US and UK. The same countries also postedworrying scores in terms of their exposure to future shocks.While none of the countries in the Index showed very strong growth,those with a reading of at least 5.0 – indicating above average growth– were in emerging markets. The table was headed by Brazil, China,and Mexico. In terms of fragility, there was a more subtle picture withthe European economic powerhouses of Germany and Switzerlandtopping the table along with Sweden and Mexico.While economic theory would tell us that a weak economy is morelikely to result in loose labour market conditions and a robust economyin tight labour conditions, this is not always the case. Sometimes weakeconomies suffer skills shortages due to inflexibility in the labourmarket, underperforming education systems and talent mismatchesthat drive up wages and creates shortages.Education and the labour marketCountries with a high quality education system, a labour market thatencourages participation and which is flexible towards shifts in demandand supply, are more likely to be able to deal with potential skillsshortages. Clearly having an education system that produces schoolleavers with the core skills employers need is likely to reduce the pressureon employers to have to pay higher wages to attract qualified staff. Inthis case the Index measures, amongst other aspects, the improvementsin outturns of the OECD Programme for International StudentsAssessment (PISA), that assesses 15-year-olds’ competencies in the keysubjects: reading, mathematics and science. As Chart 1 shows, thebiggest education-driven contributions to skills development have beenin the fast-growing Asian emerging markets such as India or China.Labour market flexibility is especially important to head off skillsshortages as openness to inward migration and relatively light labourregulations ensures employers can react swiftly to signs of stress in thelabour market. As Chart 2 shows, the range is more spread acrossregions, with small Asian states such as Singapore and Hong Kongshowing extremely high flexibility while China and other members ofthe BRIC economic grouping still being highly inflexible.Having a high labour participation rate is also important. A low scoreindicates that sufficient people are available for work in general in thateconomy. The economies with the lowest levels of potential skillsWhile the headline Index gives employers and policymakersa ready measure of labour market issues within particular countries,the breakdown of the Index into its components reveals a morenuanced picture of where stresses are located within each economy.By looking at the data under the four broad sub-groups – the stateof the economy; the makeup of the labour market and education;talent and wage pressures; and shortages by industry and occupation– we begin to see how future friction points may manifest themselves.shortages due to participation rate, were the populous nations of Indiaand China (2.5 and 3.0), although Italy (on 2.3) stands out as a positivestory. The countries with the largest concerns were a mixed bag: thehighest scores were in Spain and New Zealand (6.5 and 6.3) but Brazil’s6.0 indicates that certain emerging economies are currently constrainedby an inadequate labour market participation rate.Chart 1: Asia gives the West a lesson on education0 1 2 3 4 5 6 7 8 9 10Czech RepRussiaSwedenHungaryUSAAverageJapanHong KongChinaSingaporeIndiaHays Index score (higher number = limited potential to increase education performance)Chart 2: BRICs have inflexible labour markets0 1 2 3 4 5 6 7 8 9 10BrazilChinaFranceRussiaMexicoAverageCanadaIrelandDenmarkHong KongSingaporeHays Index score (higher number = greater level of labour market inﬂexibility)Taking a simple average of the three indicators discussed above in thisarea shows that emerging economies that have seen strong growth inthe recent past are least equipped to cope with the demand that growthmay bring. Brazil had the highest score of 7.1. However Russia andGermany stand out (6.4 and 6.1 respectively), mainly over the lack offlexibility of labour regulations.On this measure the countries in the best position to deal with skillsshortages are the Asian economies of Singapore (2.4) and India (3.2).India has seen tremendous improvements in its PISA score to the extentthat the Index sees education as now being at a level satisfactory enoughthat it is not in itself contributing to future skills shortages. Singaporescored very well on both education and labour flexibility but wasdragged down by its labour market participation levels.
8 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 9financial services executives and traders over the recent years. Since themeasure is based on the gap between the best and lowest paid jobs, italso echoes concern that inequality is rising sharply within Americanworkplaces. Singapore, which is a major financial centre for Asia, alsosees wage pressures in high-skill occupations.At the other end of the scale, two of the countries most directlyaffected by the euro debt crisis, Italy and Portugal, are showing verylittle wage pressure for high-skill occupations. On one level this can beseen as a positive as it indicates that there isn’t a great deal of wagepressure in a crucial part of the labour market. Unfortunately, this alsoshows that the severe slowdown in the economy has depressedsalaries for high-skilled personnel. The danger is that, as thoseeconomies return to growth, employers will find many candidates havelooked for work abroad, or have seen no incentive in acquiring thespecific skills required by employers.Chart 6: Wage pressure in high-skill occupationsAveragePortugalItalyMexicoHong KongNew ZealandFranceSpainJapanBelgiumNetherlandsBrazilSwedenUnited KingdomRussiaHungaryCanadaSwitzerlandPolandIndiaChinaDenmarkAustraliaCzech RepublicIrelandGermanySingaporeUnited States0 1 2 3 4 5 6 7 8 9 10Hays Index score(higher number = wages in high-skill occupations rising faster than in low-skill)skilled labour markets at an industry level. Countries that are abovethe midway points on the stress line are a mix of emerging economiesand developed nations – as well as certain Eurozone nations –indicating that wage pressures are often a country specific issue.Chart 5: Wage pressure in high-skill industriesAverageIrelandBelgiumItalyDenmarkIndiaBrazilUnited StatesJapanFranceRussiaUnited KingdomChinaSwitzerlandHong KongNetherlandsCanadaSpainCzech RepublicPolandAustraliaSingaporeGermanyPortugalSwedenNew ZealandMexicoHungary0 1 2 3 4 5 6 7 8 9 10Hays Index score(higher number = wages in high-skill industries rising faster than in low-skill)But even where there is little evidence of wage pressure and skillsshortages in high-skill industries, pressure points in key high-skilloccupations can still be a major issue for employers. By looking at jobswhere wages in high-skill occupations are outpacing those in lower-skilled jobs, it is possible to see where strong demand for qualifiedpeople is creating skills shortages and driving up wages.The wide range in the Index scores in Chart 6 shows that shortages atoccupation level vary hugely. The US has the highest reading of anycountry and close to the maximum level possible on the Index. This islikely to reflect the large rewards that have been offered to seniorTalent mismatch and wage pressureWhile economic vibrancy, the level of educational achievement andlabour flexibility are important building blocks for a sustainablelong-term market, some countries are experiencing short-termbottlenecks. By analysing mismatches between available labour andwage pressures, both overall and by industry and occupation, the Indexreveals the wide range of skills shortages in different economies.One early warning signal of skills shortages is ‘talent mismatch’ – aninability of employers to find the staff they need despite an availablepool of labour. This manifests itself most obviously in the existence of alarge number of people who are long-term unemployed. This in turn canbe a sign of structural unemployment that occurs when there is amismatch between demand in the labour market and the skills andlocations of unemployed workers.The Index on talent mismatch shows a wide range, as Chart 3 of thegreatest and least levels of talent mismatch shows. It ranges from closeto zero for the Czech Republic where long-term unemployment andunfilled vacancies are falling, and a maximum score for the US wherealmost a third of unemployed people have been out of work for at least ayear. However, this is a warning of future long-term rather than shortterm skills shortages as the graph shows there is no direct link withoverall wage pressures, which is a more short-term indicator of stress. Inthe short term, wage pressure and skills shortages are likely to be drivenby the health of the economy.Chart 3: Talent mismatch may not drive wages0 1 2 3 4 5 6 7 8 9 100 1 2 3 4 5 6 7 8 9 10Wage pressure(higher number = real wages increasing quickly relative to the longer term)Talent mismatch(higher number = suggests the available labour pool lacks required skills)Wage pressureTalent mismatchCzech RepublicBelgiumItalyNetherlandsPolandSpainHungaryUnited KingdomIrelandUnited StatesA vibrant economy often translates into strong consumer demand, strongcorporate growth and heavy demand for labour by firms, while a weakeconomy will have the opposite effect. As Chart 4 shows, overall wagepressure is at an index point of 5.0 or greater in nine countries, indicatingthat employers are having to raise wages to recruit and retain staff.Chart 4: Overall wage pressure0 1 2 3 4 5 6 7 8 9 100 1 2 3 4 5 6 7 8 9 10Health of economy(higher number = weaker economy)Wage pressure(higher number = real wages increasing quickly relative to the longer term)Average of 27MexicoCanadaRussiaIndiaSingaporeGermanyChinaAustraliaSwitzerlandHealth of economyWage pressureShortages in key industriesand occupationsThe real crunch for employers comes when skills shortages arise in specifichigh-skill industries or occupations. In order to identify the stress factors,we calculated the degree by which wages in industries or occupationsoutpaced those in less-skilled counterparts. High numbers for the industryanalysis shows that employers in particular sectors struggle to securequalified staff, perhaps because that industry is experiencing a periodof success. The occupations index seeks to highlight where the demandfor particular jobs such as senior managers are being bid up beyondthe general wage inflation in the country. This may reflect rising wageinequality across the workforce rather than across-the-boardpay pressures.As shown on Chart 5, the results for the analysis of high-skill industriesreveals that just half of the countries in our survey are experiencingsome level of wage pressures that would indicate a skills shortage.The majority of those are fast-growing emerging economies in Asia orcountries within Europe that have escaped the worst of the euro crisisand are growing strongly. However there are exceptions. Countries suchas Portugal, Spain and the UK, which face a weak growth outlook,report very high levels of wage pressure in skilled industries.There is also a split between countries with evidence of high-skillindustry wage pressure and those where that pressure appears tohave disappeared. With the exception of India, most countries withscores below 4.0 on the Index for industry wage pressure are troubledmembers of the Eurozone, such as Belgium, Ireland and Italy,indicating that the poor growth outlook has relieved strain on theirPressures build in BRICs and G7Much of the global economic growth since the financial crisis hascome from the so-called BRICs nations – Brazil, Russia, India andChina – and other emerging economies, while the Group of Seven(G7) nations have suffered anaemic growth. However the instinctiveexpectation that faster growth leads to greater skills shortages in theBRICs is misplaced. The average overall score of the BRICs at 5.3was almost identical to the 5.2 reading for Canada, France, Germany,Italy, Japan, the UK and US.These two blocs suffer from different vulnerabilities that leave themsusceptible to stresses in their labour markets and skills shortagesin the future. While the BRICs show a higher degree of labourmarket inflexibility and overall wage pressures, the G7 has shown alower improvement in education and a greater degree of talentmismatch. In terms of wage pressures for high-skill industries andoccupations the two blocs are broadly in line. It is therefore far fromclear that a country’s stage of economic development is a primaryfactor behind skills shortages.
10 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 11The regional pictureEuropeStretching from the west coast of the Republic of Ireland to the easternSiberian seaboard, Europe is not only an immense geographical areabut is also highly diverse in terms of the economic and politicalmake-up of its member countries.The euro areaGiven the breadth and depth of the Eurozone crisis and its impacts onboth economic growth and consumer and business confidence, one wouldexpect to see a decline in skills shortages especially among the mostaffected countries. However the Index and anecdotal evidence pointsto continued problems in key professions such as engineering, IT andeven retail.The economic powerhouses of France and Germany that have escapedthe worst impacts of the crisis clearly suffer from skills shortages.Germany, Europe’s largest economy, registered the equal highest readingof all countries in the Index at 6.4. This was driven by a reading of 9.2 forwages pressures in high-skill industries and 6.6 for pressures in high-skilloccupations, among the highest for any country.The most severe shortages are in engineering, IT, utilities andconstruction, which is not surprising given the industrial strengthof Germany. There is an estimated shortage of 76,400 engineers1and38,000 in the IT profession2. This has fed through to wage pressuresas employers have been forced to offer higher salaries. However thereis also a shortage of elderly care staff to help look after Germany’sgrowing ageing population – at 1.38 children per mother, Germany hasthe lowest birth rate in Europe, resulting in a population that is increasinglyskewed toward older people. The situation is not helped by strict labourlaws that make it difficult to bring in skilled workers from overseas.Germany registered 7.1 in terms of labour market flexibility, one of thehighest readings. On the positive side, the education system is seenas well-suited to getting people ready for work.However, there are concerns that skills shortages in Germany will continueto get worse. Germany’s demographic issues means there are too fewyoung people coming into the workforce and an increasing number ofelderly people who will need support and care. Employers are keen forimmigration laws to be relaxed to enable them to hire skilled workersfrom overseas.France, the Eurozone’s second largest economy, also suffers from labourmarket inflexibilities (7.9 on the Hays Index) that contribute to skillsshortages. Like Germany, the country has an acute lack of experiencedengineers in civil engineering and especially mechanical and electrical,aeronautical, and defence engineering. While the quality of the educationsystem is high, not enough qualified graduates are being produced.The problem is compounded by a talent mismatch. People are drawninto the financial and commercial sectors where there is little shortageof skills, rather than into sectors such as engineering. The Netherlands,which registered a score of 6.4 for wage pressures in high-skill industries,also suffers from shortages in engineering that has forced firms to seekengineers from overseas.Local perspective“In certain sectors, the number of jobs far outweighs thenumber of suitable candidates. There is a distinct lack ofspecialists across France with the niche skills that areneeded by employers.”– Tina Ling, Managing Director, Hays France LuxembourgThe Index includes four of the members of the so-called PIIGS groups ofcountries worst affected by the euro debt crisis – Portugal, Ireland, Italy,and Spain (Greece is the fifth). Overall wage pressures are less intensethan for the main three northern euro countries. The average readingfor wage pressures in high-skill industries is 4.6 for the southern eurocountries versus 6.9 for their northern neighbours; wage pressures inhigh-skill occupations are only 3.3 versus 5.1 in the north.Dutch go globalto solve staff shortagesOne Dutch company that designs chips for use in mobile phoneaccess cards and tracker devices needed engineers qualified inanalogue rather than digital design. As few local students nowstudy analogue design, Hays sourced candidates abroad wheresome universities still have strong curricula in analogue design.Four out of ten of Hays’ placements for this client are sourcedinternationally, mostly from the Philippines but also fromcountries as diverse as China, Canada and Lebanon, indicating atruly global market for talent.1. Germany faces a shortage of engineers. John Blau. IEEE Spectrum. September 20112. Germany’s skilled worker shortage is growing. Sabine Kinkartz. Deutsche WelleThe regional pictureThe insights provided by the Index are supplemented by theexperience and knowledge gained by Hays executives leading ourbusiness in the 27 countries featured in this report. Their insight,coupled with the analysis of the data, reveals how specific shortageshave arisen in different regions and countries and how companiesand policymakers should move to counteract these both in the shortand medium terms.“In recent years several French reports calling for structural reforms to boost competitiveness, jobcreation and economic growth have been written by the country’s best brains. Every year, the Courdes Comptes, the national audit office, compiles excellent studies pointing to inefficiencies in publicspending and how this cramps growth. Most such reports end up lining bookshelves and gathering dust.”The Economist, 3 November 2012
12 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 13In certain countries such as Spain, firms are recruiting fewer new staff,as shown by the unemployment rate of 50% for 16- to 24-year-olds inSpain. This is particularly true in property and construction that havebeen hit by declining prices and the cancellation of major governmentprojects. However evidence still reveals significant skills shortages. Inthese economies companies who need to replace skilled staff who retireor leave are finding it difficult to identify good replacement candidates.Meanwhile potential candidates in rival firms are unwilling to leave theircurrent employer because they fear they will lose the job security andtenure they have accumulated. The divide between the need bycompanies for high quality staff and the huge surplus pool of semi- andunskilled labour is highlighted by the fact that the Hays Index reading ofthe talent mismatch in Spain at 8.5 is among the highest in the survey.There is evidence that many skilled people in these countries are leavingto take up opportunities in faster growing emerging markets in Asia andLatin America and in the resource rich economies of Canada and Australiathat need skilled engineers. The real danger for these economies is thatthey are storing up problems further down the line when they do recoverand demand for taking on new skilled staff rebounds. The exodus of skilledstaff combined with a likely decline in the number of school-leavers willingto pay for further education will leave employers struggling to findcandidates when the economies do recover.Local perspective“It can be extremely difficult to fill some roles.Not necessarily because of the market, but moregenerally because candidates don’t have the confidenceto move. Finding quality candidates is tough.”– Mark Bowden, Managing Director,Hays Southern Europe Latin AmericaWestern Europe outside the euroThe four Western European countries in the Index but not in theEurozone – Denmark, Sweden, Switzerland and the UK – share manyof their neighbours’ problems but have their own individual challenges.Sweden and Switzerland have enjoyed relatively strong growthwhile the UK returned to recession in 2012 and Denmark’s economyis under pressure.Sweden is suffering from the equal highest degree of wage pressure inhigh-skill industries of any economy in the Index. The sharp widening inindustry wage differentials indicates stress in finding key talent eventhough overall wage pressure is not alarming (4.4). In contrast Denmarkhas relatively low levels of wage pressure. In Switzerland positivereadings on education (3.9) and labour market flexibility (4.2) havekept wage pressures in high-skill industries and professions relativelyrestrained although there is evidence that earnings are being pushed upacross the board (8.5).While the UK economy is likely to suffer weak growth for theforeseeable future, companies are experiencing difficulties in recruitingand retaining skilled professionals. This is immediately evident in thehigh reading of 9.0 for talent mismatch – the degree to which it isharder to fill vacancies despite the pool of unemployed people.Local perspective“What we currently see is a paradox. Millions of adults in thiscountry are unemployed, yet employers are still strugglingto find people with the right skills, experience and aptitude.”– Nigel Heap, Managing Director, Hays UK IrelandIn the UK, skills shortages can be found in the energy sector, especiallyoil and gas, as well as in IT. Despite the problems in the banking andfinancial sectors, there are still areas of demand and skills shortagessuch as risk and compliance management as increasing financialregulation has created a demand for these skills.However this is not leading to overall wage pressure, which is very low (1.3)and only “moderate” in high-skill industries (5.3). Instead companies areinvesting in in-house training to raise new recruits up to the level requiredand are taking advantage of the UK’s relatively open migration laws toattract staff from overseas. However many large employers of graduateshave significantly downsized the number of recruits they have taken onover the last two to three years, which may fuel long-term skills shortages.Eastern Europe and RussiaCountries in the former Soviet Union are very dependent on the Eurozoneand have been affected by the financial crisis and the subsequent slumpin exports of manufactured goods. Russia itself has been less affectedas it has large reserves of oil and gas and has benefited from the recentupturn in commodity prices.Evidence indicates that Russian companies are expanding their businessesglobally and are keen to recruit people with international skills to givethem a better chance to compete in global markets as well as locally.This pressure is compounded by international companies in sectors suchas retail and fast-moving consumer goods investing in Russia and seekingto recruit skilled local personnel.However, so far there is no evidence in the Index of wage pressures whichare relatively subdued for both high-skill industries and occupations(5.1 and 4.8 respectively). However scores of 7.4 for education and 7.7for labour market flexibility indicate shortages will build in the mediumterm. Compounding that is the demographic trend that is seeing thepopulation decline by a million people per year, which will add topressures as the economy continues to expand.Local perspective“The fact that firms predominantly want Russiancandidates, or candidates with local experience andlanguage knowledge, has made it more difficult foroverseas candidates to compete for jobs.”– Alexey Shteingardt, Managing Director, Hays RussiaAmong the smaller countries in Eastern Europe, such as Czech Republic,Hungary and Poland, there are signs of skills shortages particularly inhigh-skilled industries. Hungary and Czech Republic were badly hit by theeuro crisis and general wage pressure is almost non-existent. Howeverboth suffer from high degrees of wage pressure in high-skill industrieswith Hungary registering the highest possible reading of 10.0. The fastgrowing industries in the Czech Republic tend to be IT and Engineeringand in public services such as health, social care and in back officefunctions such as administration and support services. In Hungary from2008 until the beginning of 2012 pay rises slowed down compared withthe period before 2008. Industries where wage levels were above theaverage are banking finance, pharmaceutical and telecommunications.Poland, which is by far the largest economy in Eastern Europe, is seeingwage pressures in high-skill industries, especially the energy sectorwhich is the fastest growing sector in recent years.North AmericaAs one of the largest economic blocs in the world, North Americais a bellwether for developed economy labour market trends as its twoconstituent countries, the US and Canada, are both members of the G7.The US has the equal highest overall score in the Index, indicating it hasone of the tightest labour markets in terms of skills shortages. This mightbe surprising given the scale of the recession in the US economy in thewake of the financial crisis and the relative weak recovery.However the US suffers from a two-speed labour market with strongdemand for qualified skilled staff in sectors such as the oil and gasindustries, life sciences and information technology. At the same timea large number of people are either out of work or are under-employed,as they do not have the skills employers are looking for.Local perspective“There is a dichotomy in this economy. What we arewitnessing is that there is high unemployment at thesame time as there are skills shortages.”– John Faraguna, President, Hays North AmericaIn many industries and occupations there are not enough experiencedand skilled professionals but an over-supply of people at entry level andof people with a general low-skills base. While the health of the USeconomy is one of the weakest in the Index, it has one of the highestindicators for wage pressures in high-skill occupations (9.8).In certain skilled occupations such as geologists and geophysicists in theresources sector, the current generation of professionals with up to 20years of experience at the highest level is nearing retirement. Within anageing population, that is putting pressure of companies looking toreplace them. A survey in October 2011 by Deloitte, the consultants, andthe National Association of Manufacturers (NAM), an industry body,found US manufacturers had 600,000 unfilled qualified skilled posts, inspite of stubbornly high unemployment rates and high numbers ofnew training programmes3.There is a similar story in Canada exacerbated by the fact that theeconomy has recovered more quickly than many others in thedeveloped world. There are skills shortages across all industries andprofessions but especially in the resources sector – oil and gas, andmining – and also in construction and technology. At the very high-skilllevel there is evidence that shortages of available candidates are sopronounced that potential employees are able to bargain for the bestterms and conditions. Indeed once the US enters a sustainable economicrecovery, that will likely boost the Canadian economy and will in turnincrease skills shortages further.Back to the futurein the UK professionsIn the early 1990s during the last real prolonged downturnin the UK economy, many employers put recruitment on hold.However, two or three years later firms of lawyers, accountantsand professional services organisations found it very difficult tohire manager-level local staff as the pipeline of talent was notavailable due to the previous graduate recruitment freeze. Thatled to a spike in salaries at the entry level of those professions fora number of subsequent years.3. Skills shortage threatens US manufacturers. Hal Weitzman, Financial Times. 18 October 2011“The risk of unemployment among recent college graduates depends on their major. The unemploymentrate for recent graduates is highest in Architecture (13.9%) because of the collapse of the constructionand home building industry in the recession. Unemployment rates are generally higher in non-technicalmajors, such as the Arts (11.1 percent), Humanities and Liberal Arts (9.4 %), Social Science (8.9%) andLaw and Public Policy (8.1%).”Georgetown University Centre of Education and the Workforce 2012“The UK has recognised that the future employment and skills systems will need to invest as much efforton raising employer ambition and on stimulating demand as it does on enhancing skills supply. It haslaunched a number of initiatives including: Investors in people, Employer Ownership of Skills whereemployers in England are offered up to £250 million of public investment over two years to designand deliver their own training solutions; the Growth and Innovation Fund which will co-invest up to£34 million to develop sustainable skills solutions and the Employer Investment Fund where some£66 million has been committed to improve skills development in key areas.”United Kingdom Commission for Employment and Skills; Green (2012)OECD 2012 Better Skills, Better Jobs, Better Lives: A Strategic Approach to Skills Policies
14 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 15Local perspective“Canada is moving towards a more demand-driven migrationpolicy. In the past there have been too many people whoarrived with eligibility to work, only to find theirqualifications and work experience gained abroad stronglydiscounted on the local labour market.”– Rowan O’Grady, Managing Director, Hays CanadaThe concern raised by the Index is the talent mismatch and concernsover the education system, in both the US and Canada. The US scoresthe worst possible reading (10.0) for talent mismatch indicating thatemployers cannot fill posts despite a pool of surplus labour, with Canadaalso worryingly high (8.0). While US universities are generally rated thebest in the world, the US score of 6.6 for the contribution of educationlevels to future skills shortages indicates that there are problems atsecondary and elementary level. In particular there is a worry that theUS college system will not be able to meet future increased demand forskills without further investment in improvements in education.As with many other developed economies, the challenge is to ensurethe education system meets the needs of employers. Despite theundisputed high quality of education in North America, two issuesremain. The first is whether highly qualified graduates are leavingcollege with the relevant degrees and the skills employers require. Thesecond is that many students are leaving university with high levels ofdebt and entering a labour market where, at entry level, there is asurplus of candidates. This means that while graduates may have theskills needed, there are simply not enough occupations available atjunior entry level, which may compel them to take lower-skill jobssimply to pay off their debt. This raises a fear that key skills may be lostover the next few years.Companies are using a range of tools to try to address the skills shortages.Some are raising wages as shown by the high score in wage pressuresfor high-skill operations. The data show wages for workers in the utilitiessector, the highest paid in the US, have risen 20% over the five years to2012. In Canada the best-paid sectors of mining, oil and gas extractionhave seen salaries rise by 36% over the same five years. The utilitiessector, which has the second highest remuneration, has seen a 21% riseover the same five-year period.Some firms have looked to desegregate the jobs performed byhigh-skilled professionals to split the tasks between those that can becarried out by less skilled people or outsourced, to allow the top-skilledprofessionals to focus on their core roles. This is evident in the healthservices where doctors have been freed up to spend more timewith patients.Companies have also sought to attract high-quality candidates fromoverseas and both countries rate well for labour market flexibility(4.2 for the US and 3.5 for Canada). As highlighted, some companiesare taking imaginative steps to attract workers from overseas.However there is concern among employers that immigration systemsare too cumbersome, requiring organisatons to invest substantially torecruit overseas staff but still risk their potential recruits being deniedvisa clearance.The US and Canadian economies have a strong reputation for long-termeconomic growth, labour market flexibility and the capacity for jobcreation and are in strong positions to adapt to further pressures forskilled labour. However there are specific reforms that would help easecurrent and future bottlenecks.While both countries rate well for labour market flexibility and haveattracted inward migration by skilled workers, it is important that theimmigration system is better suited to filling skills shortages. Movingto a more merit-based system would help businesses meet specificshortages. Canadian businesses would like to see the governmentstreamline the immigration system that can take up to three monthsto complete from beginning to end.Local perspective“We have to become a little sharper edged so we canattract highly-skilled people who will advance our economy.There is some upgrading that needs to take place.”– John Faraguna, President, Hays North AmericaGovernments and educational leaders will need to look at whether thecurrent system at both university and college level is suited to providethe qualified school leavers businesses need. A greater focus needsto be put on apprenticeships and there is an obligation on employersto send out a strong message about the solid career and earningspotential offered by semi-skilled occupations to attract more peopleinto those sectors.Latin and South AmericaThe major economies of South and Central America have benefitedfrom the boom in commodity prices and their proximity to the US,the world’s largest economy that has increasingly looked to outsourcekey manufacturing and support functions to its neighbours. These twinengines of growth, combined with domestic restrictions in the labourand education markets, have led to skills shortages that threatento undermine their long-term growth potential.Brazil and Mexico – the two countries from the region in the Index –posted some of the most worrying scores in the survey. Unemploymentin Brazil, which had an overall score of 5.7, is low and in the key sectorsof engineering, life sciences, finance, retail and more recently oil and gasthere are broad-based shortages of skills. Wages in the extractive mineralsector have seen extremely strong rises until very recently. However thecountry suffers from inflexible labour laws and low levels of educationthat threaten to fuel long-term stresses in the labour market. While Brazilbenefits from a number of good universities, they are not producingenough people with the right skills. In sectors such as oil and gas,employers in Brazil – along with its resource-rich neighbours Chile,Colombia and Venezuela – depend on imported labour because theycannot source enough people locally.Mexico too suffers from specialist skills shortages. The country registeredthe highest possible reading for wage pressures in high-skilled industries(10.0). The industries that command the highest wages are real estateand professional, technical scientific services, where wages have risen11% and 18% respectively over the year to the end of March 2012 accordingto official data. Here too, many companies’ response is to seek to recruitfrom overseas although this may not be a panacea.While the region is currently experiencing an economic slowdown thatmay relieve pressure on skills shortages in the short-term, in the long-term the growth rates that these countries are likely to reach will meanrequirements for qualified professional people will grow. The shortagecould become acute as the economies flourish and sectors such as oiland gas will need to adopt innovative methods to find the right people.Canada reaches across the waterIn February 2012, the British Columbia Construction Association,which represents 2,000 companies, sent a delegation to attenda number of job fairs in Ireland. The construction industry in thewest of Canada was looking to attract unemployed workers fromthe former Celtic Tiger economy to fill an estimated 335,000 jobopenings between 2012 and 2014 in British Columbia4.Countries dividedby a common languageSeveral Latin American companies have invested money intoputting together major advertising campaigns and funding visitsto overseas countries to attract the talent they need. Howeverthey have often only had partial success in filling their quotas.Qualified candidates – even in countries with high unemployment– are often reluctant to move to the other side of the world dueto the risk that the job might not work out, leaving them in limbo.Brazil is trying to recruit engineers from Portugal becauseof the shared language, while Mexico has looked to recruit fromSpain. Although they have the same language, there are significantcultural differences. It can be a difficult transition to move fromLisbon to Sao Paulo or from Madrid to Mexico City.4. Canadian construction industry wants thousands of Irish workers to make the move.Patrick Counihan. Irish Central. 27 February 2012“The labour code in Mexico was last overhauled in 1970, and it shows. Mexico is the only country in LatinAmerica where it is legal to sack a woman for being pregnant. Probationary periods are not recognised.The rigid rules are intended to protect workers. But they are so cumbersome that many smallerbusinesses ignore them, leaving workers with no rights at all.”The Economist, 1 November 2012“The number of Canadian working holiday visas available to young Irish people is to be doubled andthe length of stay extended from one year to two, under a new agreement between the Irish andCanadian governments. A total of 6,350 visas will be available in 2013, up from 5,350 this year.This will rise to 10,700 in 2014.”Irish Times, 6 October 2012
16 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 17AsiaThe last decade has seen a pronounced shift in the balance of economicpower from West to East and Asia has been the most obviousbeneficiary. However it is hard to tell a single story. The region includestwo of the most populous countries in the world as well as some of thesmallest nations. It also embraces political and business structuresranging from the one-party Communist state of China to free-marketnation states such as Singapore as well as depression-affected Japan.While there is evidence of increasing skills shortages across Asia, it isimportant to highlight trends in different parts of the region.Japan, which is emerging from two decades of weak performance,has a rapidly ageing population. That has the double negative effectof increasing the demand for elderly healthcare workers whilesimultaneously reducing the supply of new entrants into theworkforce. The increase in structural and long-term unemploymenthas created a mismatch between the available workforce and themore innovative skills that employers want. Japan’s talent mismatchscore of 8.1 is one of the highest for any country in the survey.At the other end of the economic spectrum are the fast-growing statessuch as Singapore and Hong Kong that have relatively youngpopulations. Both share very high levels of education and labour marketflexibility that has enabled employers to source candidates fromoverseas. The common usage of the English language has also helpedwiden the pool for talent for sectors such as financial services. Howeverstrong levels of economic growth has fuelled demand for staff whichhas led to high levels of shortages in specific industries and occupations.While the young population should give a long-term advantage, itmeans there are often not enough senior candidates coming throughthe ranks to quality for the top posts. Wage pressure in Singapore isvery strong for both high-skill industries and occupations.In China the decision by Beijing to open its doors to foreign investorsand the desire by Chinese companies to expand internationally hasfuelled demand for skilled labour from the global labour market asdomestic candidates may not have the required skill sets. There isstrong demand for candidates with international experience who candeal with different business cultures. While China has very higheducation levels (1.5 on the Index), inflexible labour laws have led tohigh readings for labour force flexibility (8.7) that have in turn led to atalent mismatch (7.5) and overall wage pressure (7.2).Local perspective“In Japan more people are going overseas to study to secureskills required by local employers. Unfortunately it is almostfive years too late because employers need the peoplecoming through the system now.”– Christine Wright, Operations Director, Hays Asia Managing Director, Hays JapanDespite the differences in economic cultures, Japan shares with Chinaa need to recruit skilled staff from the international market who canoperate on the global stage. Until recently Japan was able to recruit thestaff it needed locally and could favour Japanese-speakers. The cultureof a job for life was very strong and there was a natural progression ofqualified staff rising up through the ranks.This has now changed and employers need to look further afield for thetalent they need, particularly in those sectors or businesses that areexpanding internationally.Despite its vast labour pool, India too has skills shortages. While it hasa working age population of around 750 million, a further 250 millionworkers are expected to join the labour pool by 2025. Furthermore,India has a target to up-skill 500 million people by 2022. However it isan issue of quality rather than quantity that is driving specific skillsshortages. There are stress points in life sciences (also seen in Japanand China), fast moving consumer goods, consumer health, RD,regulatory positions and in the construction and property industry. TheIndian auto industry is projected to be short of 300,000 skilledpersonnel by 2020, while in the oil and gas sector, demand for petrophysicists exceeded supply by almost 80% in 2010.Local perspective“In industries like manufacturing, power and infrastructurethere are unfilled posts and the inability to hire at the pacerequired. This will result in a slow-down in growth”– Gaurav Seth, Country Head, Hays IndiaWhile the Indian education system has improved massively – it wasthe only nation in the survey to show no adverse impact on skillsstress due to education – employers still have to use innovativemethods to fill key gaps. While many employers resort to wageincreases, some benchmark salaries to the market, use variableperformance-based bonuses as well as longer-term incentives likestocks and share options. Others have invested in in-house training inorder to find candidates that can be brought up to the skill levelrequired. Some large companies are working with universities toincrease the pool of employable graduates. Recruiting from overseasis also important especially now India has replaced a visa quotasystem with a requirement of a minimum annual salary that is aimedat attracting only highly-skilled foreign talent.Overall, therefore, Asian countries have some of the best records oneducation and greater access to labour than many western economies.However they face their own challenges that threaten to add toalready problematic skills shortages without further action byemployers and policymakers.“The US economy is losing thousands of foreign students who have studied sciences, technology andengineering (STEM) at American universities and then cannot get visas that allow them to stay, take jobsor establish companies.”Telegraph.co.uk, 18 October 2012“Singapore is allowing students to learn at different stages in their lives and has recognised that theacademic track is not the only pathway to a successful career in the labour market. By subsidizingboth higher education and Vocational and Educational Training students in the same way, Singapore isadjusting its skills base to suit its future growth.”Schleicher, A. (2011), Educating for the Future, The Straits Times, Review Forum, 9 December 2011OECD 2012, Better Skills, Better Jobs, Better Lives: A Strategic Approach to Skills PoliciesEmployers go back to universitySome of the major IT and back office processing (BPO) firms inIndia are increasingly working with universities with an aim to widenthe pool of talent, often working with colleges to design specificcourses. One major BPO company that had moved operationsaway from the major cities and into the smaller towns establishedlinks with local universities and helped establish specific courseson data analysis, with a greater focus on written and spokenEnglish. While the curriculum was still the standard version,the extra courses ensured graduates knew they were learningthe right skills to make them more employable. This was a classicwin-win situation as it made the university more marketable,the graduates were almost guaranteed a job and the employerhad first pick of the university leavers.
18 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 19SourcesVariable Source1. Labour freedom Heritage Foundation, 2011-2012 Index of Economic Freedom2. Barro/Lee improvementsin educationBarro, Robert and Jong-Wha Lee, April 2010, “A New Data Set ofEducational Attainment in the World, 1950-2010.” NBER WorkingPaper No. 15902.3. Change in economic participationrate (overall)International Labour Organisation (ILO)4. Change in economic participationrate (15-24 year olds)International Labour Organisation (ILO)5. Change in economic participationrate (55-64 year olds)International Labour Organisation (ILO)6. Economic participation rate rank International Labour Organisation (ILO)7. Output gap, % GDP International Monetary Fund (IMF)8. Long term unemployment rate Organization for Economic Cooperation and Development (OECD)9. Vacancies (000s) Organization for Economic Cooperation and Development (OECD),Servicio Público de Empleo Estatal, Swiss National Bank, AustralianBureau of Statistics, Statistical Office of the European Communities,Ministry of Human Resources and Social Security of the People’sRepublic of China10. GDP (LC, real, billion) Oxford Economics Global Macro Model11. GDP growth (real) Oxford Economics Global Macro Model12. Population (mn) Oxford Economics Global Macro Model13. Unemployment rate (2011) Oxford Economics Global Macro Model14. GDP/head (LC, real) Oxford Economics Global Macro Model15. Government balance Oxford Economics Global Macro Model16. Current account Oxford Economics Global Macro Model17. Non-Accelerating Inflation Rateof Unemployment (NAIRU)Oxford Economics Global Macro Model18. CPI inflation Oxford Economics Global Macro Model19. PPI inflation Oxford Economics Global Macro Model20. Imports + Exports, %GDP Oxford Economics Global Macro Model21. PISA reading scores PISA 2009 Results: What Students Know and Can Do (OECD)22. PISA math scores PISA 2009 Results: What Students Know and Can Do (OECD)23. PISA science scores PISA 2009 Results: What Students Know and Can Do (OECD)24. Average PISA rank PISA 2009 Results: What Students Know and Can Do (OECD)25. Net migration The World Factbook, Central Intelligence Agency (CIA)26. Net migration flow The World Factbook, Central Intelligence Agency (CIA)Australia and New ZealandThe two major economies in the Oceania region both face skills shortageissues but for different reasons. Australia scores around 8.0 in terms ofboth wage pressures in the overall economy and in high-skill industrieswhile New Zealand scores 10.0 for wage pressures in high-skill industries,the highest possible reading.Labour market tightness in Australia is driven by demand for high-skilledprofessionals by resource companies. While firms in the mining and oiland gas sectors make up just 2-3% of total employment and less than atenth of GDP, they are a major centre for skills shortages that have drivenup wages even despite the mixed economic recovery (Australia scored7.3 on economic health). While the resources sector is the most buoyantand fast-growing market sector in the country, it also has a large supplychain of firms connected to it.Shortages are mostly found in the operational and technical areasassociated with extractive industries, but also in accountancy and financeand other professional services for these industries. A 2012 survey byHays of 1,500 employers in Australia found a 10% annual increase in thenumber firms reporting skills shortages for operational and technicalfunctions, an increase of 9% in engineering but also an increase of 7% infirms citing skills shortages in marketing5. This is echoed by researchundertaken by the Australian Government in 2011 that found ‘nationalshortages’ – the most severe rating – in 11 engineering occupations andthree managerial roles connected to the sector6. This is likely to increaseas there is an estimated AU$500bn of projects either underway or in thepipeline at the time of writing.Local perspective‘‘We are experiencing skills shortages within a number ofprofessions from IT and procurement to highly qualifiedtechnical engineers and geologists.”– Nick Deligiannis, Managing Director, Hays Australia and New ZealandIn New Zealand there has been a significant demand for qualifiedengineers and other professionals in the construction sector to carryout the rebuilding of Christchurch after the earthquake in February 2011.As the major rebuilding projects start to come on line this will add toexisting shortages in the construction industry. This will also exacerbatethe talent mismatch between the South Island and the North Island.On an occupational basis, the shortage mainly applied to quantitysurveyors, residential project managers, senior commercial projectmanagers, machine operators and project managers with drainageexperience. This has led to the high wage inflation highlighted by theIndex as trade specialists demand higher pay and this squeeze ishighlighted by the maximum score of 10.0 for wage pressures inhigh-skill industries.Whether the pressure on skills shortages in Australia and New Zealandwill worsen or ameliorate will depend on the outlook for the marketfor raw materials and energy. If the current slowing growth in Chinaand other fast-growing economies proves temporary and economicgrowth recovers in the US and Europe, then pressures on recruitingand retaining experts in that sector will intensify.Firms in Australia have started to take measures to offset thepressure. Companies in the resource sector have sought to recruitstaff from other parts of Australia and especially the easternseaboard around Sydney. To attract talent to relocate, firms needto be increasingly innovative on flexible working rosters as wellas remuneration.Australia scored well on labour market flexibility in the Index, with ascore of 3.8 against a global average of 5.4, which was based on itsopenness to immigration and flexible labour laws. The country’spoints-based migration system went through a major review in July2012 that adopted occupation-specific caps in the hope that the countrywill better be able to respond to the needs of the economy. Australia’s4.3 score on education (better than the global average of 4.8) is basedon the fact that Australia has a well-educated workforce. New Zealandscored 4.5 on labour market flexibility and 3.7 on education, indicatingthese are not sources of labour market stress.“Australian Federal Government will fast-track the assessment process for skilled US workers comingto Australia. Under the agreement, US tradespeople will able to complete a skills assessment beforecoming to Australia.”ABC News, Australia, 2 April 20125. http://www.hays.com.au/salary-guide/index.htm6. Skills Shortage List Australia 2011. Department of Education, Employment and Workplace Relations.
20 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 21Oxford EconomicsOxford Economics is one of the world’s foremost independent globalforecasting and research consultancies, renowned for its econometric-based consulting and extensive research services. Founded in 1981,Oxford Economics was originally formed as a joint, commercial venturewith the business college of Oxford University, Templeton College.Since its foundation, Oxford Economics has grown into an independentprovider of global economic, industry and business analysis,headquartered in Oxford, UK.Oxford Economics is a world leader in quantitative analysis, going deeperand further than other economic advisory firms, in helping its clientsto fully assess the opportunities and challenges they face for futurestrategy and direction. It specialises in global quantitative analysis andevidence based business and public-policy advice, underpinned bya sophisticated portfolio of business forecasting services consistingof regularly updated reports, databases and models on countries,cities and industries.For more information, visit www.oxfordeconomics.comPhil Thornton, Clarity EconomicsPhil Thornton is lead consultant at Clarity Economics, a consultancy andfreelance writing service he set up after a 15-year career as a newspaperjournalist. Clarity Economics (www.clarityeconomics.com) looks at allareas of business and economics including macroeconomics, world trade,financial markets fiscal policy, and tax and regulation.He has written for a range of publications including The Wall StreetJournal, The Independent, Independent on Sunday, The Guardian,The Times, The Daily Telegraph, Financial Director, Emerging Markets,City AM and PM-Select. He writes a regular economics columnfor Procurement Leaders.Recent projects include a series of report looking at the position of ethnicminority groups within the UK workforce for Business in the Community;drawing up proposals for reform of the EU Budget for Business fora New Europe; and an examination of lessons learned 20 years afterBig Bang for The Centre for the Study of Financial Innovation.In 2010 he won the Feature Journalist of the Year award in the WorkWorldMedia Awards. In 2007 he won the title of Print Journalist of the Yearin the same awards. Until 2007 he was Economics Correspondent atThe Independent newspaper of London, a post he held for eight years.HaysHays is the world’s leading recruiting expert in qualified, professionaland skilled work. We employ over 7,800 staff in 245 offices across33 countries. Last year we placed around 55,000 people in permanentjobs and nearly 182,000 in temporary positions.Hays works across 20 areas of specialism, from healthcare to telecoms,banking to construction and education to information technology,covering the private, public and not-for-profit sectors.Our recruiting experts deal with 150,000 CVs every month and morethan 50,000 live jobs globally at any one time. The depth and breadthof our expertise ensures that we understand the impact the rightindividual can have on a business and how the right job can transforma person’s life.Our job is to know about professional employment, employersand employees.For more information, visit hays.comContributorsThe Hays Global Skills Index 2012 RESULTS èIn partnership with:
22 | The Hays Global Skills Index 2012 The Hays Global Skills Index 2012 | 23THEAMERICASEUROPEASIAAUSTRALIA NEW ZEALAND184.108.40.206.220.127.116.11.18.104.22.168.4 6.16.1 5.75.55.04.22.214.171.124.126.96.36.199.35.2INDIAJAPANHONG KONGSINGAPOREAUSTRALIANEWZEALANDBRAZILMEXICOUNITEDSTATESCANADAUNITED KINGDOMIRELANDPORTUGALBELGIUMPOLANDCHINACZECHREPUBLICHUNGARYGERMANYITALYRUSSIASWEDENNETHERLANDSDENMARKSWITZERLANDFRANCESPAINThe HAYS Global Skills INDEX 2012In partnership with:Creating the Hays Global Skills IndexThe Hays Global Skills Index highlights the main pressure points impacting the labour markets of 27 countries.The Hays Index ranges from 0 to 10.0 where a score of 5.0 indicates a generallybalanced picture for labour markets. This suggests firms are able to recruit,retain or replace their key talent at prevailing wage rates. A score close to 0indicates intense competition for key talent vacancies. A score close to 10.0indicates severe difficulty in filling key vacancies.• Education flexibility. Measures whether the education system can adapt tomeet organisations’ future talent needs, particularly in the field ofmathematics, science and literacy. A high score means there is limitedpotential or capacity to increase education performance and output. A lowscore indicates there is considerable scope to expand the output and quality ofthe local educational system.• Labour market participation. Measures the degree to which a country’s talentpool is fully utilised. A high score means that the proportion of working agepeople that are employed (or are available for immediate work) is notincreasing, indicating constraints on the availability of additional resource. Alow score means that the participation rate reflects the increasing availabilityof talent to join the workforce.• Labour market flexibility. Assesses the legal and regulatory environmentfaced by businesses. A high score means the labour market legislation isjudged to be inflexible and there are constraints on the ability of inwardmigrants to fill talent gaps. A low score means the labour market legislationis judged to be flexible, with an openness to immigration.• Talent mismatch. Measures the mismatch between the skills needed bybusinesses and skills possessed by the labour force. A high score means that thenumbers of long-term unemployed and vacancies are both increasing suggestingthe available labour does not have the skills employers want. A low score impliesthat employers are having an easier time finding the talent they need.• Overall wage pressure. Whether wages are keeping pace with inflation, whichis a measure of overall labour market tightness. A high score means real wagesare increasing quickly relative to the longer term. A low score means realwages are not rising quickly (or are even declining) relative to the longer term.• Wage pressure in high-skill industries. The rate at which wages in high-skillindustries outpace those in others. A high score means wages in high-skillindustries are rising much faster than in low-skill industries. A low score meanswages in high-skill industries are not rising faster than in low-skill industries.• Wage pressure in high-skill occupations. A measure of wage premium paid inhigh-skill occupations, which is an indicator of shortages of key talent. A highscore means wages in high-skill occupations are rising faster than in low-skilloccupations. A low score means wages in high-skill occupations are not risingfaster than in low-skill occupations.These seven criteria are all given equal weighting.Each country’s Hays Index is surrounded by a coloured dial indicating the scoreranges for the seven labour market indicators.The analysis on which the Hays Global Skills Index was based utilised dataas of Q3 2012. Developments subsequent to this date are not reflected inthe 2012 findings.5.1EducationﬂexibilityLabour marketparticipationLabour marketﬂexibilityTalent mismatchOverall wagepressureWage pressurein high-skillindustriesWage pressurein high-skilloccupationsLOW PRESSURE HIGH PRESSURE0.0-0.9 4.0-4.9 8.0-8.93.0-3.9 7.0-7.91.0-1.9 5.0-5.9 9.0-9.9 10.02.0-2.9 6.0-6.9