Factors Responsible for the Skills Shortage in the UK Manufacturing Industry - Research Proposal Example

AN INVESTIGATION OF FACTORS RESPONSIBLE FOR SKILLS SHORTAGE IN THE UK MANUFACTURING INDUSTRY By Student’s Name Institutional Affiliation Course Name & Number Date of Submission Table of Contents Table of Contents 2 CHAPTER ONE 4 1.1 Background Information 4 1.2 Research Objectives 5 1.3 Research Questions 5 1.4 Justification of the Study 6 1.5 Significance of the Study 6 1.6 Scope of the Study 6 CHAPTER TWO 7 2.0 LITERATURE REVIEW 7 2.1 Introduction 7 2.2 Theoretical Framework 7 2.2.1 Static Shortage Theory 7 2.2.2 Dynamic Shortage Theory 7 2.3 Effects of Skills Shortage in the Manufacturing Sector 8 2.4 Benefits of Having Enough Skilled Employees 9 CHAPTER THREE 10 3.1 Introduction 10 3.2 Research Design 10 3.3 Population of Study and Sample Frame 10 3.4 Sample and Sampling Procedure 10 3.5 Instrumentation 11 3.6 Data Collection 11 3.7 Data Analysis 11 REFERENCES 12 Allen, K 2016, “Most UK manufacturers are struggling to recruit skilled workers – report.” The Guardian 29 March, viewed 15 Jan. 17 https://www.theguardian.com/business/2016/mar/29/uk-manufacturers-struggling-recruit-skilled-workers-eef-report 12 Booth, A. L., & Snower, D. J 1996, Acquiring skills: Market failures, their symptoms and policy responses. Cambridge University Press, London. 12 Chow, S. L 1996, Statistical significance: Rationale, validity and utility. SAGE, Mason. 12 Cohen, M. S., & Zaidi, M. A 2002, Global skill shortages. Edward Elgar Publishing, London. 12 Mayes, D. G 1996, Sources of productivity growth. Cambridge University Press, Cambridge, MA. 13 Sentance, A 2015, “The UK may not be a manufacturing powerhouse anymore, but here's why our economy can still thrive.” The Telegraph 25 Sep., viewed 15 Jan. 17 http://www.telegraph.co.uk/finance/economics/11891837/The-UK-may-not-be-a-manufacturing-powerhouse-anymore-but-heres-why-our-economy-can-still-thrive.html 13 The Manufacturer 2016, UK manufacturing statistics, viewed 15 Jan. 17 http://www.themanufacturer.com/uk-manufacturing-statistics/ 13 CHAPTER ONE 1.0 Introduction The manufacturing sector is a key driver of the economies of industrialized nations. According to a recent study, it was discovered that manufacturing sector contributes about £6.7 trillion to the global economy (The Manufacturer 2016). The United Kingdom is amongst the industrialized nations whose economy is largely driven by the manufacturing sector. Report indicates that the UK manufacturing sector currently at position 11th in the world and accounts for approximately 11 percent of UK gross value added (GVA). The industry also employs more than 2.6 million people in the UK besides accounting for about 54% of the UK exports (The Manufacturer 2016). The manufacturing industries include automobile, pharmaceutical, aerospace, and utilities among others. The high contribution of the manufacturing sector to the UK economy implies that the industry needs to be supported both infant and mature companies to ensure sustainability. However, Allen (2016) reports that the UK manufacturing industry has been struggling in the recent years due to skill shortage. This study will investigate the factors responsible for the skills shortage in the UK manufacturing industry. 1.1 Background Information The UK’s manufacturing industry is ranked the 11th largest in the world. The industry plays a critical role in the economic growth and development of the nation as it accounts for a large part of the £6.7 trillion global manufacturing industry (The Manufacturer 2016). Currently, the manufacturing sector accounts for about 11% of the UK GVA and employs more than 2.6 million people and this makes the sector among the top employers in the UK (The Manufacturer 2016). The manufacturing industry also accounts for the largest share of the UK exports with about 54% of the UK exports coming from the manufacturing sector. The UK currently ranks the second largest aerospace manufacturer in the world, according to the DFEE (1997) report. At the same time, the country ranks among the leading chemical and pharmaceutical manufacturers in the world with the industries generating up to £20 million daily to the IUK trade balance. Despite the contributions of the industry to the UK economy, the industry has been on a decline trend since the 1960s and this has been an issue of concern to the industry analysts, industry players and the government. Production of the manufacturing sector has been declining at a faster rate and this has raised questions as to the sustainability of the industry amidst growing competition from industrialized nations (Oliver & Turton 1982, p. 165). In July 2015, for instance, the manufacturing output fell by 0.8% compared to the previous month and this has been the trend over the last few decades (Sentance 2015). Although there are many factors linked to the bad state of the UK manufacturing industry, shortage of skilled workers ranked top. The sustainability of the industry requires highly skilled personnel, such as engineers for the industry to compete with the rest of the world. Unfortunately, Allen (2016) report indicates that most UK manufacturers currently struggle to recruit skilled workers. Continued lack of skilled workers means that the industry would not be sustainable as it needs skilled people to ensure productivity and success. 1.2 Research Objectives The objective of this research is to investigate the factors responsible for the skills shortage in the UK manufacturing industry using Land Rover-Jaguar as a case study. The specific objectives include: a) To investigate how lack of technical skills contribute to skill shortage in the UK manufacturing industry b) Investigate how lack of training contributes to skill shortage in the UK manufacturing industry c) Investigate how ineligibility of skilled people to work in the UK contributes to the skills shortage in the UK manufacturing industry. d) Investigate the effects of outsourcing contributes to skills shortage in the UK manufacturing sector. 1.3 Research Questions a) Does lack of technical skills in the labour contributes to the skills shortage experienced in the UK manufacturing industry? b) Does lack of training of employees responsible for the skills shortage experienced in the UK manufacturing industry? c) Does ineligibility of qualified people to work in the UK responsible for the skills shortage in the UK manufacturing industry? d) Does outsourcing responsible for the skills shortage in the UK manufacturing industry? 1.4 Justification of the Study The need to conduct a study on this topic has been necessitated by the fact that there exists a research gap focused on the factors responsible for the skills shortage in the UK manufacturing industry. Most of the existing literatures are focused on the general factors, such as global competition is contributing to the decline of the UK manufacturing industry with little research having been dedicated to investigate the factors responsible for the skills shortage in the industry (DFEE 1997; Haskel & Martin 1993a). Therefore, there is a need to bridge this gap by determining the factors responsible for skills shortage in the industry. 1.5 Significance of the Study The research findings will be useful to the UK manufacturing industry in many ways. First, the findings of this study will help industry leaders, especially the employers to understand the causes of the skills shortage and how to address the problem. Second, the findings will help inform government policy decisions on how to increase the skills availability for the manufacturing industry. Additionally, the findings of this research will help aspiring professionals to understand the skills required and how to improve to increase their employability. 1.6 Scope of the Study This research will be limited to the UK manufacturing sector with a focus on 4728 manufacturing companies in the country (Manta 2016). The research will seek the opinions of human resource managers of the companies on the factors they believe to be responsible for the skills shortage in the manufacturing sector. CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 Introduction This chapter provide the literature review discussing the variables and the theoretical framework and empirical research. The aim of the literature review is to determine the factors responsible for skills shortage in the UK manufacturing sectors. 2.2 Theoretical Framework 2.2.1 Static Shortage Theory This theory looks at the skill shortage in an organization or industry through the lens of supply and demand. According to this theory, if the demand for labour in a market exceeds the available supply, then a shortage occurs (Cohen Zaidi 2002, p. 23). The theory holds that, in a labour market, the shortage of skills in a market is eliminated by competitive forces that drive wages up. In other words, static shortage theory looks at skills shortage in an industry as an issue to do with wages paid to the employees to the extent that high wages creates an incentive for skilled people while low wages does the opposite. 2.2.2 Dynamic Shortage Theory Dynamic shortage is s theoretical model proposed by Arrow and Capron in 1959. According to this theory, shortage of skills in an organization or industry is explained in terms of the speed adjustments and the existing barriers to adjustments to the labour conditions (UKCES 2010). The theory is based on the assumption that the employer does not have perfect information about the market conditions and the same applies to job seekers who also lack perfect information about job availability in a market (Cohen Zaidi 2002, p. 23). As such, there is a continuous adjustment process to the changing conditions in the market with many factors interacting at the same time. According to Arrow and Capron 1959, theory, when the demand curve shifts steadily upwards, this produces a shortage of skills and vacancies arise in positions where wages are the same as those offered in similar jobs elsewhere (UKCES 2010). This implies that shortages are caused by persistent shifts in the demand curve as the labour market tries to adjust to the changing conditions. On the same note, the theory maintains that unfilled vacancies in certain positions produce shortages when the number of employees’ available increases less compared to the number of workers demanded at the wages paid previously (Cohen Zaidi 2002, p. 23). 2.3 Effects of Skills Shortage in the Manufacturing Sector Skills shortage is a major issue affecting the growth and success of industries across the globe. The shortage of skills has particularly been found to have adverse effects on manufacturing industries that require highly skilled people to function. According to Green et al. (1998, p. 169), skills shortage affects the productivity. For a company to succeed, it must have skilled and productive workers. Shortage of skills, therefore, affects the performance of a company by increases hiring cost per skilled employee and this forces most companies to substitute to less productive unskilled employees (Haskel & Martin 1993b, p. 391). According to the static theory of skill shortage, when an industry lacks enough skilled candidates to fill a vacancy, the few available in the market tends to demand high pay, which most firms are sometimes not ready to pay (Booth & Snower 1996, p. 67). As a result, the companies opt for less productive unskilled employees to take up the positions. In the end, this affects the performance of a company since unskilled employees are not only prone to errors, but also require constant supervision to do the job, which may be substandard (Shah & Burke 2005, p. 51). The UK manufacturing industry is cited in most literatures as being an example of an industry, where productivity have been declining since the 1960s due to the inadequacy of skilled personnel needed to work in the manufacturing industries such as auto industry (Haskel & Martin 1993a, p. 574). Because the few available skilled workers demand high pay, which UK manufacturing firms cannot afford, the majority have been forced to hire unskilled people to work in the manufacturing sector and this has resulted in a sharp decline in the productivity and growth of the UK manufacturing sector, which now struggles as it cannot compete effectively in the global market. Shortage of skilled in the workplace has been found to affect productivity by giving employees a stronger bargaining power to demand an easy pace at work. Haskel (2001, p. 642) indicates that, when employees know that they do not have an easy replacement in the workplace due to skill shortage, they tend to demand an easy pace at the workplace and this has the potential and severely affecting organization and industry productivity and performance as has been demonstrated by the UK manufacturing industry that has been struggling for many years now due to the difficulties in getting candidates with the right skills. 2.4 Benefits of Having Enough Skilled Employees Employees are regarded as a critical resource for the success of a company. However, the contributions of employees depend on their skill level and the ability to meet company objectives. It is for this reason that companies focus on getting the best talents in the market so as to ensure result and to give a company a competitive edge over rivals in the industry. According to Mayes (1996, p. 21), having skilled personnel is a great source of competitive advantage. Having skilled employees is beneficial to an organization because it promotes innovation and creativity. In the modern day competitive business environment, creativity and innovation is key to success of a company. Coelli and Wilkins (2008, p. 311) note that the top companies are those where innovation and creativity thrive. Examples in the UK include Apple, UK, Samsung, UK, and Jaguar Land Rover. The success of these companies is attributed to the fact that they have highly skilled employees who are not only creative, but also innovative. Mok et al. (2012, 16) and Stevens (2007, p. 239) argue that creativity and innovation is important for the success of a company as it acts as a differentiating factor in an industry. Therefore, having skilled employees is important, especially for manufacturing companies as it ensures creativity and innovation in the sector. Availability of skilled employees is also beneficial to an organization since it ensures greater productivity. Highly skilled employees understand what they are doing and require little or no supervision to do their jobs (Healy et al. 2011, p. 19). Besides, skilled workers are less prone to errors because they have the right technical skills required to do their jobs. Accordingly, this ensures high productivity, which results in the success of a company. The importance of skilled employees is particularly required in the manufacturing industry where errors are not tolerable because they can result in serious disasters that might prove costly to a company (Haskel 2001, p. 644). CHAPTER THREE 3.0 Research Methodology 3.1 Introduction This chapter describes how the research will be conducted. The chapter provides a detailed explanation of the study design to be used, methods of data collected, targeted population, sampling techniques, instrumentation and data analysis technique to be use in order to come up with the findings. 3.2 Research Design This study will use descriptive study design. Descriptive study design is appropriate for this study as it will help in investigate the how, what and where variables. The design is also appropriate as it will enable ease of recording, analysis and reporting of the existing condition in the labour market. The study seeks to determine the factors that are responsible for the skill shortage in the UK manufacturing industry. 3.3 Population of Study and Sample Frame The targeted population for this study will be the human resource managers of 4728 manufacturing firms in the UK (Manta 2016). The research will seek the opinions of the HR managers in the manufacturing industry regarding the factors responsible for the skills shortage in the industry. 3.4 Sample and Sampling Procedure This research will be conducted through simple random sampling procedure. A repetitive sample of 500 manufacturing companies will be used in the study in which one human resource managers of each of these companies will be chosen at random to take part in the study. Human resource managers have been chosen for the study and specifically from the manufacturing industry because they are better placed to provide the information. A large sample of 150 out of 4728 companies is representative enough to draw a conclusion. Chow (1996, p. 61) suggests that a population (n) of 10% to 30% is statistically significant to draw a reliable conclusion. 3.5 Instrumentation This research will be conducted using questionnaires. Questionnaires have been chosen for use in the study because the advantages it has over other data collection techniques, such as interviewing. These advantages include confidentiality, time saving and because questionnaires are a suitable tool for collective raw data. The respondents in the study will be issued with one questionnaire each to feel voluntarily. The questionnaire will consist of both open and closed ended questions. Closed questions will ensure that there is uniformity as to how the questions are answered. Open-ended questions will give the respondents a chance to provide personal views in a more detailed manner. 3.6 Data Collection Data will be collected by issuing the respondents with questionnaires to fill. However, only the respondents who are voluntarily willing to take part in the study will be given the questionnaires. Before filling the questionnaire, each of the 500 respondents will be explained to the purpose of the research, their rights and confidentiality will be maintained. We expect the data to be collected for a period of three weeks followed by analysis of the data collected from the field. 3.7 Data Analysis The data gathered from the respondents will be analyzed using a mixture of both qualitative and quantitative techniques. The data collected will first be summarized through descriptive statistics and summarized in table to allow ease of analysis of the variables being tested. Content analysis will then be used in analyzing the data. The findings of the study will then be compared with the existing literature on the factors responsible for the skills shortage in the UK manufacturing industry. REFERENCES Allen, K 2016, “Most UK manufacturers are struggling to recruit skilled workers – report.” The Guardian 29 March, viewed 15 Jan. 17 https://www.theguardian.com/business/2016/mar/29/uk-manufacturers-struggling-recruit-skilled-workers-eef-report Booth, A. L., & Snower, D. J 1996, Acquiring skills: Market failures, their symptoms and policy responses. Cambridge University Press, London. Chow, S. L 1996, Statistical significance: Rationale, validity and utility. SAGE, Mason. Coelli, M & Wilkins, R 2008, ‘Are skill shortages a constraint on increasing employment in Australia?’ Australian Economic Review, vol.41, no.3, pp.310-322. Cohen, M. S., & Zaidi, M. A 2002, Global skill shortages. Edward Elgar Publishing, London. DFEE 1997, The skill needs in Britain survey 1997. Department for Education and Employment, London. Green, F, Machin, S & Wilkinson, D 1998, ‘The meaning and determinants of skill shortages’, Oxford Bulletin of Economics and Statistics, vol.60, no.2, pp.165-187. Haskel, J 2001, ‘Technology, wages and skill shortages: Evidence from UK Micro-data’, Oxford Economic Papers, vol.53, no.4, pp.642-658. Haskel, J & Martin, C 1993a, ‘The causes of skill shortages in Britain’, Oxford Economic Papers, vol.45, pp.573-588. Haskel, J & Martin, C 1993b, ‘Do Skill Shortages reduce Productivity? Theory and Evidence for the UK’, Economic Journal, vol.103, no.417, pp.386-394. Healy, J., Mavromaras, K., & Sloane, P. J 2011, “Adjusting to skill shortages: Complexity and consequences,” Discussion Paper No. 6097, pp. 1-33. Manta 2016, Manufacturing in the U.K., viewed 15 Jan. 17 http://www.manta.com/world/Europe/United+Kingdom/manufacturing--E7/ Mayes, D. G 1996, Sources of productivity growth. Cambridge University Press, Cambridge, MA. Mok, P., & Mason, G., Stevens, P., & Timmins, J 2012, "A good worker is hard to find: Skills shortages in New Zealand Firms," Occasional Papers 12/5, Ministry of Economic Development, New Zealand Oliver J. M., & Turton J. R 1982, “Is there a shortage of skilled labour?, British Journal of Industrial Relations, vol. 20, no. 2, pp. 195-200. Shah, C & Burke, G 2005, ‘Skill Shortages: Concepts, Measurement, and Policy Responses’, Australian Bulletin of Labour, vol.31, no.1, pp.44-71. Sentance, A 2015, “The UK may not be a manufacturing powerhouse anymore, but here's why our economy can still thrive.” The Telegraph 25 Sep., viewed 15 Jan. 17 http://www.telegraph.co.uk/finance/economics/11891837/The-UK-may-not-be-a-manufacturing-powerhouse-anymore-but-heres-why-our-economy-can-still-thrive.html Stevens, PA 2007, ‘Skill shortages and firms’ employment behaviour’, Labour Economics, vol.14, no.2, pp.231-250. The Manufacturer 2016, UK manufacturing statistics, viewed 15 Jan. 17 http://www.themanufacturer.com/uk-manufacturing-statistics/ UKCES 2010, A theoretical review of skill shortages and skill needs, viewed 15 Jan. 17 http://dera.ioe.ac.uk/1297/1/Theoretical%20review_2.pdf Read More