eskills-monitor

Bonn, Milan, Brussels, 3 December 2009 - empirica and IDC EMEA Government Insights anticipate that the EU labour market may face an excess demand of 384,000 ICT practitioners[1] by 2015. The number of ICT professionals in Europe was 4.7 million in 2007 and is forecast to be between 4.95 and 5.26 million in 2015 depending on five foresight scenarios. Accordingly the e-skills gap, or unfilled vacancies, will amount to between 1.7% and 13% of the existing occupations by 2015. Empirica and IDC EMEA Government Insights have developed five foresight scenarios for Europe including a “back to normal” scenario, which describes how the labour market for ICT practitioners will evolve if we get back onto the previous, pre-crisis trajectories in terms of growth rates, the number of computer science students and graduates and the role of ICT-based innovation as a driving factor of European economic development. Contrasting with this scenario, they analysed four alternative paths varying the main factors that influence the demand and supply for e-skills: GDP growth, the pace of the economic recovery, the ICT innovation rate, ICT policies and the attractiveness of ICT jobs and careers in general. The variations in these factors were inputs to a predictive model they have developed and which is based in particular on historically observable elasticities and dependencies. The report was commissioned by the European Commission, DG Enterprise and Industry.

“Predicting the future is always and naturally speculative to some extent but especially difficult in times like these, when there is so little agreement about when the economic rebound will finally stabilise. Especially the economic development until 2015 is the unknown factor that will have a major effect on how demand for IT professionals will develop” says Werner B. Korte of empirica. “This is why we have chosen to cover a rather broad scope of likely futures, if at the expense of a more scattered set of prognoses. Nevertheless, what our five scenarios have in common is that there will be an excess demand for ICT practitioners again by 2013 and by 2015 it will reach a non-negligible quantity – and even in a very severe fashion in case we see an economic recovery gaining momentum already from 2011 on.”

The main findings of the report provide confirmation of the relevance of the key components of the EU long term e-skills agenda presented by the European Commission in September 2007 in its Communication on “e-Skills for the 21st Century: Fostering Competitiveness, Growth and Jobs” and referring to the need of a longer-term cooperation, multi-stakeholder partnerships, increased human capital investment (private and public), appropriate financial and fiscal incentives, development of a European e-Competences Framework and tools at EU level for mobility and transparency, improving the attractiveness of ICT-related professions and education (e.g. promoting science, maths and ICT education) and promoting lifelong learning  (regular e-skills updating) as well as innovative e-learning and training approaches.

One major recommendation the report has to offer to policy makers and stakeholders is to act more swiftly and decisively. Says Tobias Hüsing of empirica: “Although we see in this crisis that firms are eager to retain their ICT skilled staff as long as possible, we should note that there is significantly more potential short term volatility on the demand side than on the supply side of the labour market. There is natural inertia on the supply side stemming from the educational system and the time it takes for instance to earn a degree in computer science – while lay-offs are linked in a much shorter term to economic developments. So any effort that policy spends to enhance the attractiveness of ICT careers has to bear in mind the enormous lead time and policy must prepare for the post-crisis sooner rather than later.”

The global foresight scenarios that the study presents are:

Back to normal – a return to “before the crisis” moderate growth development model, with ICT-based innovation developing unevenly across Europe. This results in a limited e-skills gap (estimated at 384,000 excess demand in 2015, about 8% of the ICT workforce);

Investing in the future – a scenario of moderate growth similar to the previous one until 2011, when, thanks to decisions to step up investments in ICT innovation and the future Internet, there is an acceleration of economic and ICT growth, expected to increase after 2015. This leads to higher demand for R&D and ICT skills in the period 2012-2015, with an estimated e-skills gap of 580,000 jobs in 2015, about 11% of the ICT workforce.

Turbo knowledge economy – the knowledge economy takes off in Europe, thanks to a virtuous circle of productivity and economic growth driven by widespread diffusion of ICT-based innovation. ICT careers become more attractive and demand of e-skills grows, leading to an e-skills gap of approximately 669,000 jobs in 2015, about 13% of the ICT workforce, even if the attractiveness of ICT jobs increases, leading to a slight increase of e-skills supply.

Tradition wins – after the crisis, an export-driven recovery advantages traditional industries, rather than high-tech and innovative industries, resulting in a combination of moderate economic growth with low ICT growth. The relocation of the ICT industry outside of Europe accelerates and the demand of e-skills from 2010 to 2015 grows very slowly while the attractiveness of ICT careers declines. A small level of excess demand of e-skills remains, but at the same time there are mismatches between demand and supply across the EU, particularly in the countries where the advanced high intensity IT users remain an important presence.

Stagnation – a very slow recovery, accompanied by domestic protectionism in the most important countries, discourages innovation investments. The European socioeconomic system struggles to keep up with the emerging economies and tends to close itself (“fortress Europe”), with low ICT investments counterbalanced by IT off-shoring growth. Both demand and supply of e-skills are flat, without growth, and the result is a very small e-skills gap accompanied by mismatches in the e-skills labour market across Europe.

The full study report is available at: http://www.eskills-monitor.eu (website) http://www.eskills-monitor.eu/foresight-2/

Chart: e-skills Demand and Supply Gaps (excess demand) in the EU27 until 2015

Source: empirica and IDC, e-Skills Monitor 2009

The report was commissioned by

Disclaimer:

This is a press release of the e-Skills Monitor study team (empirica and IDC EMEA Government Insights). Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the information in this press release. The views expressed are those of the authors and do not necessarily reflect those of the European Commission. Nothing in this press release implies or expresses a warranty of any kind.

What is your opinion? What are your suggestions? Please add your comment!

The following model captures in a dynamic view the supply of e-Skills in Europe. While a major challenge is dealing with the imponderables of quantifying the inflow of Computer Science and other subject graduates to the labour market, the question that we deal with today is also important for the dynamics in the IT labour market: how do we estimate and calculate the supply potential coming from unemployed IT professionals and other “inflows” such as career changers who turn to IT, re-entrants who return to work, immigration of IT professionals, etc.,  and also “outflows” such as retirees, temporary leaves or exits from work, or possibly even emigration of IT professionals?

In a world with perfect statistics, we would think that this be a proper dynamic measurement model:

Source: e-Skills Monitor.

In the middle of the picture we have the supply of e-Skills to the labour market, consisting of IT professionals (whether statistically filed under ISCO 213/312 or others) and unemployed IT professionals looking for a job. In the dynamic perspective, people enter and leave the job market for IT skills, which is depicted by the arrows on the left and on the right side of the picture. We also have certification and re-skilling activities which may apply to incumbents as well as entrants, however, and hence must not be added as inflows of their own.

However, as we will see subsequently, data about many of the inflows and outflows is not kept track of, and hence statistics are not available.

Inflows: Supply potential coming from unemployed IT professionals

According to the most recent data sources available with data from 2008 in Germany, France and the United Kingdom it becomes apparent that the rate of unemployed IT professionals is around 4%. This varies between 2.6% (in the UK, but 3.6% in the IT industry), 3.8% in Germany and 5.2% in France.

We believe that the situation will be rather similar in the other European countries.

It will be difficult to assume what share of unemployed IT professionals will immediately find new jobs in an ICT profession especially against the background of the continuous shifts in demand for IT professionals in industry towards new and very specific skills and qualifications different to those many of the unemployed IT professionals might come up with.

Only for The Netherlands we could identify an indication on how many of the unemployed IT professionals are estimated to find a job in ICT. The ICT~Office has based their calculations on the (as they call it themselves) very optimistic assumption that 70 percent of the job seekers will find a job in ICT over the next years (Pegge, Bart: ICT labour market in perspective. In: Centraal Bureau vor de Statistiek: De digitale Economie 2008).

For Germany, we find the information that the number of newly unemployed and re-employed IT professionals have been very similar over the last five years. The number of re-employed has been only slightly above newly unemployed, resulting in a decline in the absolute number of unemployed.

For instance in December 2008 in Germany: 21.9% of all unemployed IT professionals and 24.8% of computer scientists re-entered the workforce (link). We have no data on the average duration of unemployment, but if one fifith to one fourth of unemployed IT professionals re-enters the labour market each month, the “turnover” appears to be rather high and an average duration of unemployment can be estimated between two to five months. However, we do not know what share remains unemployed for a longer time or turns to other occupations outside IT.

Since there are nearly as many newly unemployed IT professionals becoming unemployed, the net re-entrance rate is only 0.83% and 1.9% respectively. This would mean that in normal times and on aggregate level we may disregard exits to and entries from unemployment. Except that these are not normal times.

Whether this implies that the observed unemployment is frictional rather than mismatch unemployment and whether the 70% re-entry rate might be too high remains difficult to assess.

Without reliable data from other countries and sources one can only guess about the present situation in other countries and in Europe in general.

When estimating the e-Skills supply potential coming from the unemployed IT professionals we plan – unless more reliable data can be made available – to use the above (average) 4% unemployment figure and will base the calculation on the assumption that only 20% these will re-enter the labour market as an IT professional in a one-year period.

We would highly appreciate further information on the current situation on the above issues from other European countries and kindly ask the experts whether they can provide us with similar information for their own and other European countries.

Inflows: Supply potential coming from other than ‘Computer Science’ graduates

Similar to the number of IT professionals which are not originating from the occupational groups 213 or 312 (Computer professionals and Computer associate professionals) also not only graduates from ‘Computer Science’ are those with IT specialist skills. Several of the graduates from other disciplines like for instance “mathematics, engineering, manufacturing, construction” also come up with these skills or enter the labour market to be trained on IT jobs and should also be counted as IT professionals. But how many of the graduates will fall under this category?

A major problem will probably be that this share of supply varies considerably with the demand. In times of high demand, more physicists, engineers and philosophers will turn to (or be drawn to) IT, while in times of demand slump the willingness to hire “outsiders” might plummet.

How can one reliably estimate and calculate the number of graduates with IT specialist skills from disciplines other than ‘Computer Science’?
Have any of the experts reading this posting made some experiences in estimating and calculating such graduates with IT specialist skills not classified as ‘Computer Scientists’?

Inflows: Supply potential coming from career changers, re-entrants, immigration of IT professionals

Data on career changers to ICT professional jobs, re-entrants of ICT professionals after the end of the family phase, or by those having attended further education and training courses to bring them back into the labour market or for other reasons but also data on the number of IT professionals immigrating from other countries could not be identified.

For the time being we will neglect the supply potential coming from career changers, re-entrants and immigration of IT Professionals in our calculation of IT professional supply figures assuming that they will be negligible in number.
The experts are kindly asked to comment on this.

Outflows: retiring IT professionals, career changers, temporary exits and emigration of IT professionals

The actual number of IT professionals retiring, changing their career to a non-ICT job, temporarily leaving the labour market for different reasons or those emigrating can be seen as a groups of individuals leaving the labour market and therefore need to be subtracted from the IT professional supply figures. Whether or not these groups constitute relevant or substantial groups of supply side exits very much depends on their absolute number or relative share.
Data on these supply side exits is hardly available. So far only the replacement rate of IT professionals and career changers per year in The Netherlands could be identified. In 2007 it was calculated by Researchcentrum voor Onderwijs en Arbeidsmarkt (ROA) to be at 2.3% of the professional ICT population (quoted in: Pegge, Bart: ICT labour market in perspective. In: Centraal Bureau vor de Statistiek: De digitale Economie 2008; English translation, p. 191). It remains an open question, whether this figure will be at comparable levels in other European countries or differ widely and in which direction.

No data could be identified on temporary exits and the emigration of IT professionals.

For the time being we will neglect the outflow coming from retired IT professionals, career changers, temporary exits and emigration of IT professionals assuming that these will be negligible in number.
The experts are kindly asked to comment on this.

What is your opinion? Please add your comment!

The unfilled demand for e-skills manifests in hard-to-fill vacancies on the side of employers. Generally and according to the Eurostat enterprise survey of 2007 among private sector enterprises of 10 and more employees, 17.6 percent of the European enterprises employ ICT specialists and 7.2 recruited or tried to recruit IT specialists. Based on the same source 47% of enterprises which (try to) recruit personnel with ICT specialist skills had hard to fill vacancies in this area.

Source: Eurostat data base retrieval 04/2009

However, this data shows the number of companies but does not allow to calculate the actual number of hard to fill vacancies, i.e. open IT positions in European companies.

In order to estimate the actual number, we have made use of data on the median number of IT positions at organisations and of IT positions being actively recruited by companies in the countries surveyed from the CompTIA White Paper on “Skills Gaps in the World’s IT Workforce” published in February 2008. The data comes from a survey of 3,578 “IT Managers” in Australia, Canada, China, France, Germany, India, Italy, Japan, The Netherlands, Poland, Russia, South Africa, United Kingdom, and the USA.

According to their (non-representative) survey, half of the companies have open positions, and the median number of IT positions (filled and unfilled) in these organisations was 20, of which the median of open IT positions was 5 (ergo: 15 filled), of which 4 positions were being actively recruited.

The other half of the respondents reports no open positions. We might expect that in this half of employers there is even some oversupply, we might assume 5% (i.e. one redundancy in 20 jobs).

That means, at this point in time, 4 unfilled vacancies existed for every 15 employed IT professionals in one half of the enterprises, while the other half had one redundancy in 20 employed IT professionals.

Now the aggregate demand would amount to 19/15=127% of employed IT professionals in one half, and 95% in the other half. Together (average of 95% and 127%= 110.8) this would result in a 10.8% excess demand.

If one calculates with the 3.78 million IT-workers according to the LFS, the excess demand at this point in time would have amounted to 408,000 unfilled vacancies, totalling the aggregate demand at 4.18 million jobs. However, this figure appears to be extremely high.

It has to be said that this survey took place in late 2007, i.e. before the crisis. Also, the survey was mainly among very large corporations (44% of the respondents are enterprises with 1000+ employees). Is it reasonable to assume that the ratio of open vacancies to existing IT staff is similar in smaller enterprises? Unfortunately, the study does not tell us about this relationship.

For estimating the 2009 numbers and to come up with a figure for Europe for a ‘crisis’ situation / scenario we have multiplied the 2007 demand for IT professionals in Europe with 10%. Using this calculation the actual demand for IT professionals in Europe is estimated to be 40,800.

Still, this figure appears rather high, comparing to what CEPIS had in their most optimistic scenario, namely an over-demand of 70,000. However, CEPIS used a completely different methodology in that they apparently did not account for any excess demand in their baseline, but only in the (then) future developments based on the scenarios.

The above are the only sources we managed to identify and which are providing at least some data which – with all its insufficiencies – we have used in our first attempt for estimating the absolute number of hard to fill vacancies of IT professionals in Europe. We would like to discuss the above data sources, calculation procedure and estimate with experts who may also know of other and better data sources and methodological procedures.

Please post your comments. Where possible, please provide sources, empirical evidence and data supporting your opinion and arguments.

We have received quite some response to our last post, some of it visible in the comments, and some via e-mail not meant to be published**. Thanks to all who have shared their views so far!

We used the base “all enterprises” for the recruitment data – where “recruiting enterprises” might have been seen as the natural denominator, and we assumed a close link between the number of graduates in science/maths/computing and ICT workforce – where one has to admit that we don’t know where exactly the ICT specialists in the workforce come from in terms of education. Of course, in a research report this would have at least required a caveat in the footnote.

However, if at the risk of being accused of “nonsense“, it was our aim to get the discussion started.

In bullets, these are some of the issues that readers have pointed us to:

• Re the hard-to-fill vacancies statistics:  Change the percentage base and 47% of the enterprises that sought to hire ICT professionals had trouble finding suitable candidates. This is maybe the opposite of  the claim that there were no severe skills shortages.
• Skills shortages come to a large degree from the pace of change of technology in the industry.  “There can easily in a fast evolving industry of fluid standards be severe shortages of particular specialists”.
• The figures used in the quote reflect only one of six scenarios of the CEPIS study “E-Skills in Europe: Matching Supply to Demand”. The scenario “dark days”, which appears much more likely given the economic crisis of today, claims a much lower demand and appears to be a realistic assessment of the current situation.
• Look at school education in CS, also at the allocation of public budgets for IT education in school and tertiary education.
• Societal factors such as the reputation and the competences of IT vocations
• Don’t look only at graduates from science/math/computing, but IT is becoming a significant part of other studies as well, e.g. in medicine.
• This is also reflected in shortages in the labour market where “linkers” are needed – people who combine expertise in IT with a background in law, medicine, accounting, etc.

The upcoming posts therefore will discuss how to interpret the data used: the demand side data (e.g. the hard-to-fill vacancies), the supply side data (graduates), and the status quo data (ISCO data on IT practitioners). And of course all the data that we haven’t got yet but which may or may not be available somewhere. We hope to keep getting the readers’ views on these topics!

More on this soon.

** Given that many of our readers would be seen to respond as representatives of their companies or organisations – which would require an official endorsement process not too helpful if one wants receive frank (and quick) answers, communication by e-mail is possibly the best way to keep a discussion running. We would like to encourage readers to keep sending us e-mails if commenting publicly is not feasible.