English
KRIVET Issue Brief is the English version of its original Korean publication, which is issued fortnightly. This is available only in electronic form online.
2013
No.
23
Publisher Young-bum Park ｜ Publication date 2013. 3. 15 ｜ Published by KRIVET
Skills shortage in the service industry
- In 2012 enterprises with 30 or more employees in the service industry indicated a manpower shortage of 72,000 (manpower shortage ratio of 2.4%), among which 15,000 (or 21.3% of manpower shortage) could not be filled due to lack of skills - Among employees, the proportion of those who failed to meet the skill levels required by employers reached 8.8%
- Small and medium-sized enterprises(SMEs) are experiencing the more severe skills shortage than large ones
- The proportion of employees lacking skills was higher in enterprises that had difficulties in attracting a sufficient number of qualified applicants or went through skills shortage at the recruitment stage
01 Introduction
1｜
Needs to improve the skill levels in SMEs for higher productivity in the service industries
● Despite its fast growth, service industry is considered to have very low productivity; qualitative improvement is required along with quantitative growth
- The labor productivity of the service industries is about a half of that of the manufacturing industry and also at the bottom, compared to the other OECD countries
- High-valued services and high skilled workers are necessary in the industry
- To do this, it is necessary to identify the skill levels of workers and how close they are to the skills required by the enterprises, and analyze the related factors
●
In the analysis, skill shortage could be divided into two categories: Shortage of skilled applicants at the recruitment stages and shortage of skilled incumbent workers after recruitment
- The shortage of skilled applicants lead to under-skilling of employees unless proper education or training is provided, which is one of the main causes of low productivity
- This paper aims to analyze the current status of skill shortage in the service industries by the size of firms as well as the sector and show that the skill shortage problems may result in the polarization among companies.
｜
Data
● Employer Skills Survey (ESS) by KRIVET(2012)
- ESS, which has begun in 2010, investigated skill needs and shortage of enterprises in the service industries in 2012 and the manufacturing industry in 2013
● Sampling method
- Stratified sampling for enterprises with 30 or more employees in the service industries: 13 strata by the main industry categorization and 5 strata by the size of firm
- In-person or by-fax surveys collected a sample of 2,498 enterprises (as of 2012)
｜Source｜
1) This paper was written based on Kim et al.(2012) “Study on National Skills Outlook” by KRIVET
02 Data and Methodology
｜
Measures of skill shortage
● Only regular workers in sampled companies responded to the survey, consisting of 8 types of occupations (managers, professionals, clerks, service workers, salespersons, skill-related workers, operation and assembly workers, and elementary labors).
● Skill shortage at recruitment
- Recruitment for the purpose of filling empty or lacking positions fail due to the skill shortage of applicants - The following equations were established among the number of existing employees (E), the number of empty
positions (V), and the number of empty positions due to skill shortage (S).
The shortage rate of skilled employees [S/(E+V)] =
the rate of empty positions [V/(E+V)] × the rate of empty positions due to skill shortage (S/V)
- ‘The rate of empty positions’ refers to the ratio of empty positions to employees that a company needs overall (the number of existing employees + the number of employees to be hired). ‘The shortage rate of skilled employees’ refers to the ratio of skilled employees that needed to be hired to employees that a company needs overall. ‘The rate of empty positions due to skill shortage’ refers to the ratio of empty positions due to skill shortage to empty positions in general.
● The rate of employees with skill shortage
- The ratio of under-skilled employees to existing employees
｜
The rate of empty positions was 2.4%; the rate of empty positions due to skill shortage was 21.3%; the shortage rate of skilled employees was 0.5%; and the rate of employees with skill shortage was 8.8%
●
The rate of empty positions in the service industries was 2.4% in total (72,039 empty positions), among which 21.3% were empty positions due to skill shortage (0.5% of the total positions, 15,323 empty positions due to skill shortage)
●
Large enterprises with 300 or more employees showed the lowest rate of empty positions at 0.9% (9,075 empty positions).
- By contrast, enterprises with 100 to 199 employees showed the highest rate of empty positions at 4.1% (22,271 empty positions)
- Compared to the large enterprises, SMEs were found to have had long-term difficulties in finding employees
●
In contrast to the tendency in the rate of empty positions, the rate of empty positions due to skill shortage was higher in large enterprises with 300 or more employees (15.5%) than medium enterprises with 200 to 299 employees.
- High income and good working conditions in large enterprises with 300 or more employees seemed to solve recruitment difficulties overall, but difficulties in finding skilled applicants existed.
●
Nevertheless, considering the total employees each company needed, large enterprises with 300 or more employees showed the lowest shortage rate of skilled employees at 0.1% (1,410 empty positions due to skill shortage).
- Small enterprises with 50 to 99 employees showed the highest shortage rate of skilled employees at 0.9%
(5,640 empty positions due to skill shortage).
- Despite that the smaller the company, the less it needed skilled employees, small or medium companies reported more empty positions with skill shortage and higher shortage rate of skilled employees. This indicates that smaller companies have more difficulties in recruiting skilled applicants.
●
The rate of employees with skill shortage in the service industries was 8.8% in total: Large enterprises with 300 or more employees showed the lowest rate (7.4%)
- Enterprises with 200 to 299 employees showed the highest rate of employees with skill shortage at 14.3%
- The relationships between the shortage rate of skilled employees and the rate of employees with skill shortage reveals that skill shortage at recruitment tends to lead to skill shortage of employees.
02 The Current Status of Skill Shortage in the Service industries in 2012
2013. 3. 15
(unit: %)
Sector Skill shortage at recruitment Rate of employees
with skill shortage Rate of empty
positions (A) Rate of empty positions due
to skill shortage (B) Shortage rate of skilled employees (A*B)
30 to 49 2.8 22.7 0.6 7.6
50 to 99 3.2 29.2 0.9 9.9
100 to 199 4.1 18.3 0.7 9.3
200 to 299 3.1 13.7 0.4 14.3
300 or more 0.9 15.5 0.1 7.4
Total 2.4 21.3 0.5 8.8
｜
The rate of empty positions was highest in the transportation sector and the shortage rate of skilled employees, the rate of empty positions due to skill shortage, and the rate of employees with skill shortage were highest in the accommodation and restaurant sector.
● The rate of empty positions was highest in the transportation sector at 7.0% (31,215 empty positions)
- The rate of empty positions due to skill shortage was highest in the accommodation and restaurant sector at 53.0%
- The shortage rate of skilled employees was also highest in the accommodation and restaurant sector at 1.5%
(1,562 empty positions due to skill shortage), and no skill shortage was found in the real estate and leasing sector.
- The number of empty positions was highest in the transportation sector (31,215 empty positions) and second highest in the public health and social welfare sector (8,774 empty positions). The number of empty positions due to skill shortage was also highest in the transportation sector(31,215 empty positions due to skill shortage) and second highest in the publication, media, broadcasting, and information service sector(1,731 empty positions due to skill shortage)
● The rate of employees with skill shortage was highest in the accommodation and restaurant sector (17.8%)
(unit: %)
Sector Skill shortage at recruitment Rate of employees
with skill shortage Rate of empty
positions (A) Rate of empty positions due
to skill shortage (B) Shortage rate of skilled employees (A*B)
Sewage/waste, recycling, and environment 1.3 26.9 0.4 12.9
Wholesale and retail 1.4 27.4 0.4 13.2
Transportation 7.0 17.7 1.2 9.1
Accommodation and restaurant 2.8 53.0 1.5 17.8
Publication, media, broadcasting, and information service 2.0 31.9 0.6 5.4
Finance and insurance 0.9 2.8 0.0 2.9
Real estate and leasing 1.3 0.0 0.0 0.0
Professional, science, and technology 1.5 28.4 0.4 4.8
Facility management and business support 1.5 15.7 0.2 10.5
Education service 1.1 11.9 0.1 9.7
Public health and social welfare service 2.1 19.4 0.4 8.4
Art, sports, and recreation 2.4 26.1 0.6 8.1
Associations, repair, and others 1.6 21.0 0.3 16.6
Total 2.4 21.3 0.5 8.8
<Table 1> Skill Shortage by Size of Enterprises (no. of employees)
[Figure 1] Skill Shortage by Size of Enterprises
<Table 2> Skill Shortage by Sector
Samseong-ro 147-gil, Gangnam-gu, Seoul, Korea, 135-949｜Tel : +82-2-3485-5000/5100｜Fax : +82-2-3485-5200｜www.krivet.re.kr
｜
Logit Analysis on Factors Affecting Skill Shortage of Employees
● Conducted logit analysis to find out how skill shortage at recruitment affected skill shortage of employees - The results shows that skill shortage at recruitment affects skill shortage of employees
- Education and training have positive effects on decreasing skill shortage for new employees but not existing employees - Shorter history and more employees are related to lower skill shortage of employees. More new employees,
higher proportions of non-regular employees, and more specific skills needed are related to higher skill shortage of employees
- Considering degrees, or education levels, at recruitment has positive effects on decreasing skill shortage, but neither work experience nor qualification did.
● Compared to the average adolescents, happy adolescents were significantly higher in satisfaction with life,
‘good at sports’, and ego-maturity by 11.8%p, 26.2%p, and 6.5%p, respectively, confirming that they are important factors influencing happiness of young people
● There were little differences between happy adolescents and the average adolescents with respect to educational level, employment status, outlay on culture and sports, outlay on private education, performance level on major subjects, satisfaction with school, or future career decision
Characteristics of companies
History +
R&D section Labor union
Number of employees -
Ratio of permanent employees at recruitment + Ratio of permanent employees to temporary employees + Skill shortage
at recruitment
Shortage rate of skilled employees +
Rate of empty positions +
Rate of empty positions due to skill shortage +
● Improvements in the skill levels of workers in the service industries are needed for higher productivity
- Compared to large companies, SMEs that have disadvantages in the labor market experience more difficulties in recruiting skilled manpower; the skill gaps between companies lead to gaps in productivity and income, which in turn would worsen the skill shortage in SMEs.
- Given that SMEs lack opportunities for appropriate education or training, policy measures to support employers for effective education or training should be considered to improve skill levels of SMEs.
Ga Woon Ban(Associate Research Fellow, KRIVET) [Figure 2] Skill Shortage by Sector
｜Note｜
E. Sewage/waste, recycling, and environment, G. Wholesale and retail, H. Transportation, I. Accommodation and restaurant, J.
Publication, media, broadcasting, and information service, K. Finance and insurance, L. Real estate and leasing, M.
Professional, science, and technology, N.
Facility management and business support, P. Education service, Q. Public health and social welfare service, R. Art, sports, and recreation, S. Associations, repair, and others
｜Note｜
1) The dependent variable was whether or not the employee had skill shortage and the shortage rate of skilled employees was calculated by itself or by multiplying the rate of empty positions and the rate of empty positions due to skill shortage.
2) Unobserved characteristics of individual companies were controlled for by random effect estimation.
3) Control variables including the sector, the types of occupations, and the characteristics of workplace are not presented in the table. 4) Empty cells indicate statistically insignificant
effects.
04 Implications
<Table 3> Logit Analysis on Factors Affecting Skill Shortage of Employees Education
and trainings
Time on education or trainings for existing employees Time on education or trainings for new employees - Governmental support at education or trainings Characteristics
of skills Importance of company-specific skills + Importance of industry-specific skills + Skill levels
considered at recruitment
Degree (education level) -
Work experience Governmental certificates Private certificates Internationally authorized
