Developing a new European indicator of potential skill shortages

Skill shortages are a type of skill mismatch whereby employers are unable to fill existing vacancies due to a lack of suitably qualified or skilled candidates. Despite representing a significant concern for policymakers, the literature on skill shortages is highly underdeveloped, as a result of a lack of clarity and consistency on how skill shortages are defined and measured. In this study, using data from the 2021 European Skills and Jobs Survey combined with Lightcast job advertisement data, we attempt to bridge the methodological gap by developing a measure of potential skill shortages that can be readily replicated across countries over time. Benchmarking an objective measurement approach to a dataset reflecting the current distribution of skills and competencies being utilized within the labour market constitutes, in our view, a novelty within the skill shortages measurement literature. We estimate that approximately two per cent of vacancies in the EU are likely to experience skill shortages. We find substantial variation in estimates across occupations and countries. Moreover, potential skill shortages tend to be in occupations within which the skill content is changing more rapidly over time.