What is a skill shortage

The vocational education and training (VET) system has an important role to play in assisting with the smooth matching of the skills wanted by employers with the skills offered by workers. This report aims to clarify the term ‘skill shortage’ and to explain how skill shortages can be resolved naturally by market forces. It also provides some guidance on determining when a skill shortage requires public-policy intervention. It is a component of a research program in which the evolving labour market and changing work organisation and management in the context of the VET sector are examined. The report looks in detail at the meaning of supply of and demand for skills in the Australian labour market, focusing in particular on the way in which skill shortages are identified and addressed. The report does not attempt to quantify any overall or particular shortage of skills. It is directed at policy-makers, employers, industry bodies and training providers interested in understanding the nature of skill shortages.