The global economy is transforming rapidly, driven by technological advances, the move towards net-zero emissions, ageing populations, changing consumer preferences, and evolving business practices. These changes are reshaping skill needs, often creating gaps between the skills available in the workforce and those needed by firms. This chapter explores the extent of these skill gaps across countries, sectors, and firm sizes using new data from the PIAAC Employer Module. It examines the types of skills for which gaps are reported and their impact on firm performance. It provides insights for policy makers to better understand and address these challenges.
Understanding Skill Gaps in Firms
Results of the PIAAC Employer Module
Abstract
How firms experience skill gaps
Firms are navigating a changing global economy that is being reshaped by AI, shifting consumer preferences, the reorganisation of supply chains, the drive for climate sustainability and broader demographic changes. As firms adapt, skill gaps – mismatches between the skills needed by firms and those available in their current workforce – are becoming more critical. On average across countries, 36% of firms experience some extent of skill gaps, with the biggest incidence of gaps occurring in the Slovak Republic (54%), followed by Italy (37%), Portugal (32%), the Netherlands (31%) and Hungary (27%).
When firms identify skill gaps, they often pertain to only some of their employees. Very few firms (<5%) indicate that most or all their workforce lacks the necessary skills for their roles.
Some firms are unaware of potential skill gaps, with the highest levels of uncertainty reported in the Netherlands (18%) and Hungary (15%). This lack of awareness likely stems from inadequate skills assessment and planning, particularly in smaller companies.
Larger firms are more likely to report skill gaps than smaller ones (59% on average vs. 34%). This may reflect real differences in skill gaps due to greater organisational complexity and more decentralised decision-making in larger firms, as well as greater awareness of these gaps due to more systematic skill needs assessment (see also Chapter 2).
Skill gaps are most prevalent in the manufacturing sector (41% on average vs. 32% in the communications and finance sector, for example). Differences between sectors can reflect differences in underlying skill needs but may also arise from the different ways and speeds at which technological progress transforms industries and subsequently changes the skills required.
According to firms, employees most often lack technical, problem-solving and teamwork skills. Across all countries, large firms report shortages in IT and management skills, while small firms are more likely to identify gaps in customer service and problem-solving skills. Firms in the communication and financial sectors are more likely to have gaps in IT and management skills, while firms in the manufacturing and construction sectors face gaps in technical skills. These reported skill gaps likely reflect the different needs of firms of different sizes and in different industries.
There is a clear divergence in perceptions of skill gaps between employers and employees, particularly when it comes to digital skills, where employees are more likely to report gaps in this area. This highlights the importance of a skill needs assessment that draws on insights from management and HR, employees, and their representatives.
Almost all firms reporting skill gaps acknowledge that these gaps have a negative impact on performance. The main concerns are an increased workload for existing staff, difficulties in implementing new working practices and rising operating costs. Although not the main concern, around one in five firms in all countries report losing business to competitors or not being able to take on as much work as they would like, while almost one‑third cannot introduce new technologies.
The global economy is undergoing profound transformations, driven by technological advances such as artificial intelligence (AI), the reshaping of global supply chains, changes in consumer preferences and behaviour, and the need for business models to be environmentally sustainable. These forces present significant opportunities for firms to improve their productivity and competitiveness. They also present complex challenges, particularly in recruiting, developing and retaining a workforce with the skills needed to thrive in this evolving landscape.
As firms strive to adapt to a rapidly evolving landscape, the need for workers with new and more advanced skill sets is growing. Skill gaps – defined as the mismatch between the skills available in a workforce and those required to meet current and future business needs – are becoming a critical challenge for firms (Box 1.1). Organisations increasingly require employees who can combine technical expertise with advanced cognitive and socio‑emotional skills and work effectively alongside AI and autonomous systems. Addressing these skill gaps is essential, as they directly impact an organisation’s ability to innovate, stay competitive and achieve sustainable growth (McGuinness, Pouliakas and Redmond, 2018[1]; McGuinness and Ortiz, 2016[2]).
To better understand these changes, the PIAAC Employer Module surveyed firms with ten or more employees on the changes they had been affected by in the last three years.1 The share of firms that were significantly affected by some kind of change is 88% in Italy, 73% in Portugal, 61% in Hungary, 49% in the Slovak Republic and 43% in the Netherlands. On average across countries, changes to ICT and processes, working methods and organisational practices, and contact with customers are most likely to affect firms (Figure 1.1). Such changes can leave workers – even those with high levels of education and skills – lacking the specific skills required for their job. Whether they translate into sustained skill gaps depends on the ability of firms to recognise, diagnose and address them (McGuinness and Ortiz, 2016[2])
Share of firms that indicated having experienced change in the named areas in the past three years (%)
Note: Unweighted average across participating countries.
Source: PIAAC Employer Module (2022).
The PIAAC Employer Module is a unique dataset capturing employers’ perspectives on these skill gaps. The initial wave of the survey was conducted in five OECD countries – Hungary, Italy, the Netherlands, Portugal, and the Slovak Republic.2 This chapter first presents the empirical results of the extent of the skill gap faced by firms in different countries, industries and of different sizes.3 It then explores the types of skills that employers consider to be lacking, before analysing the relationship between skill gaps and firm performance. Finally, it compares employer and employee perspectives on skill gaps by drawing on results of the 2023 Survey of Adult Skills. These findings are essential for policy makers seeking to understand the extent of skill gaps in the economy and to identify the support needs in addressing the gaps for different types of firms.
Skill gaps refer to situations where workers lack the skills required for their current job, according to employers. Unlike skill shortages, which indicate a lack of skilled workers in the labour market, skill gaps relate to a firm’s current employees and are specific to the needs of the firm. Skill gaps can therefore be understood as micro-level mismatches, whereas skill shortages are macro-level mismatches.
Under-skilling refers to a worker’s perspective on skill gaps and denotes a situation where workers do not have what they consider to be the necessary skills for their current job. While skill gaps and under‑skilling are closely related, they are not identical.
Source: Marcolin and Quintini (2023[3]) Measuring skill gaps in firms: the PIAAC Employer Module, OECD Social, Employment and Migration Working Papers No. 292, https://doi.org/10.1787/903c19c9-en and Cedefop (2010[4]), Briefing note: Skill mismatch in Europe, June 2010, www.cedefop.europa.eu/files/9 023_en.pdf
Skill gaps have been less widely studied than other types of skill imbalances. Skill gaps are typically understood as the difference between the skills workers currently possess and the skills they need to perform their jobs effectively (Marcolin and Quintini, 2023[3]; McGuinness, Pouliakas and Redmond, 2018[1]). This can encompass a wide range of skills, from technical job-specific skills to cognitive and non-cognitive skills. Furthermore, these skill needs can vary across jobs, occupations and sectors (OECD, 2017[5]).
Research has mainly relied on employer surveys to measure skill gaps, which come with the usual caveats around subjectivity and perception bias (McGuinness, Pouliakas and Redmond, 2018[1]; Rikala et al., 2024[6]; Centeno, Karpinski and Urzi Brancati, 2022[7]). These surveys directly ask firms whether, or what proportion of, their workforce lacks skills, and about the specific skills they perceive to be lacking. This approach captures the extent of workers’ deficiencies in relation to current job requirements. The inverse approach of asking workers to assess their skills is often reflected in the concept of ‘under-skilling’. While skill gaps and under-skilling are closely related, they are not identical. Research using linked employer-employee data shows that workers tend to report higher levels of skill deficiencies than employers (McGuinness and Ortiz, 2016[2]). This disparity may be because employees consider broader career development needs, while employers focus on immediate – and often short-term – operational needs.
The PIAAC Employer Module follows this approach but provides new insights by using a standardised approach to collect data across several countries. It asks firm representatives to estimate how many of their employees lack the necessary skills to perform their job at the required level. The data highlight substantial differences in the extent of reported skill gaps across the five countries, with over half of firms in the Slovak Republic acknowledging some degree of skill gap (54%), the highest of all countries (Figure 1.2). This is followed by Italy (37%), Portugal (32%), the Netherlands (31%) and Hungary (27%). Where firms identify skill gaps, these most frequently concern only few or some of their employees. Much smaller shares of firms (<5%) report that most of or all their employees do not have the skills needed to do their job to the required level.
A non-negligible share of firms state they do not know whether they have a skill gap, at, most notably, 18% in the Netherlands and 15% in Hungary. The uncertainty expressed by many firms about the skill gaps in their workforce is likely to reflect a wider problem of inadequate skills assessment and anticipation, particularly in smaller firms. According to OECD research, many firms assess their future skills and competence needs (OECD (2021[8]), see also Chapter 2). However, they often use only basic methods and do not use their assessment for strategic workforce planning. In addition, skill needs are typically assessed by HR and management functions, with limited involvement of employees and their representatives, who could provide complementary insights (OECD, 2021[8]).
Share of all firms reporting skill gaps by intensity, by country
Note: Countries are ordered by descending share of firms identifying skill gaps; some data for the Netherlands are censored due to confidentiality constraints.
Source: PIAAC Employer Module (2022).
Understanding how skill gaps differ across firms of different sizes and sectors is essential for developing targeted strategies to address them effectively. Data from the Employer Module show that large firms are most likely to report skill gaps (Figure 1.3). In all countries, more than 50% of large firms state that they experience a skill gap, ranging from 72% in the Slovak Republic to 52% in Portugal. By contrast, 51% of small firms in the Slovak Republic and only 25% of small firms in Hungary report similar issues. It should be noted that, in aggregate, the majority of skill gaps are in fact concentrated in small and medium sized firms, which constitute the majority of businesses in the economy.
This pattern is aligned with patterns observed in previous research on skill gaps (McGuinness and Ortiz, 2016[2]; Fissuh, Gbenyo and Ogilvie, 2022[9]). It may reflect both real differences in the experience of skill gaps between larger and smaller firms, and different levels of awareness of these gaps. Larger firms typically have more formalised management practices, which include workforce planning and the systematic assessment of skills (OECD, 2021[8]; McGuinness and Ortiz, 2016[2]; Storey et al., 2010[10]). Larger firms may also be less agile than smaller firms to react and adapt to changing skill demands on their workforce, due to organisational complexity and more decentralised decision making processes (Bueechl et al., 2021[11]; Baum and Wally, 2003[12]).
Share of firms in each size group reporting some degree of skill gap, by country (%)
Note: Share of firms reporting any kind of skill gap includes some, few, most or all employees; Countries are ordered by descending share of firms identifying skill gaps; Small refers to firms that employ 10‑49 employees; Medium refers to firms that employ 50‑249 employees, Large refers to firms that employ 250 or more employees.
Source: PIAAC Employer Module (2022).
When looking at skill gaps within sectors of activity, patterns across countries are less consistent, though in most countries, the highest proportions of firms with skill gaps are found in manufacturing. (Figure 1.4). A notable exception is Italy, where skill gaps are comparatively evenly distributed across sectors, with firms in communication and financial services having the highest share (40%). The sectors with the lowest shares of firms with skill gaps vary between countries and are communications and financial services in Hungary (20%), the Netherlands (25%) and the Slovak Republic (45%), construction in Italy (32%), and real estate, business services and arts in Portugal (25%). Differences between sectors may be partly due to the different ways and the different speeds in which technological progress is reshaping industries and thus the skill requirements in different sectors (Nedelkoska and Quintini, 2018[13]; OECD, 2023[14]).
Regression analysis looking at the link between skill gaps and firm characteristics largely supports the descriptive analysis discussed above (Table 1.1). It finds that medium and large firms are more likely than small firms to experience a skill gap (Models 1 and 2). However, when they experience skill gaps, these tend to be less pronounced than in small firms (Models 3 and 4). This may be because medium and large firms have more resources and strategies to address skill gaps before they escalate (see details below). Additionally, in smaller firms with fewer employees, even a small number of individuals with skill gaps can make the overall gap in the workforce feel more significant.
The construction sector is less likely to experience skill gaps compared to manufacturing, while other industries do not significantly vary in their likelihood of experiencing skill gaps, after controlling for other background characteristics (Models 1 and 2). When construction firms experience skill gaps, they also tend to be less severe (Models 3 and 4).
This analysis also finds that younger firms – those created in the last two decades – are more likely to exhibit skill gaps (Model 2), though they are not significantly more likely than older firms to experience more pronounced gaps (Model 4). This may be because younger firms are generally less well-established in the market and do not yet have well-functioning processes to identify and address skill gaps, or because their work processes may be changing more rapidly.
Share of firms in each industry reporting some degree of skill gap, by country (%)
Note: Share of firms reporting any kind of skill gap including some, few, most or all employees; Countries are ordered by descending share of firms identifying skill gaps; Manufacturing refers to NACE Rev. 2. B, C, D, E, Construction refers to NACE Rev. 2. F, Wholesale; Transport; Accom refers to NACE Rev. 2. G, H, I, Comm; Finance refers to NACE Rev. 2. J, K, Real Estate; Services refers to NACE Rev. 2. L, M, N, R, S.
Source: PIAAC Employer Module (2022).
OLS coefficients
Note: Any size skill gap includes firms indicating skill gaps for some, few, most or all employees; Pronounced skill gaps include firms indicating skill gaps for most or all employees; Medium firm refers to 50‑249 employees, Large firm refers to 250 or more employees (reference category is small firms; 10‑49 employees); Construction refers to NACE Rev. 2. F, Wholesale; Transport; Accom refers to NACE Rev. 2. G, H, I, Comm; Finance refers to NACE Rev. 2. J, K, Real Estate; Services refers to NACE Rev. 2. L, M, N, R, S (references category is Manufacturing; NACE Rev. 2. B, C, D, E); Younger firm refers to firms created 2001‑20 (references category is firms created before 2000); regressions control for country; standard errors clustered at the country-size‑industry level; p-values in brackets; significance levels as follows: * p <0.05, ** p < 0.01, *** p <0.001.
Source: PIAAC Employer Module (2022).
Frontier firms, i.e. firms that are more productive, more innovative, and more profitable (Andrews, Criscuolo and Gal, 2015[15]), may be more likely than other firms to experience skill gaps. As these firms develop innovative products and adopt cutting-edge technologies, the skill needs required of their workforce may evolve faster than their employees can upskill, creating skill gaps. In addition, the specialised skill sets required by frontier companies are often in high demand but low supply in the labour market overall, making it difficult to satisfy skill needs through hiring. Data from the PIAAC Employer Module finds that firms that are more innovative are more likely to experience a skill gap, when compared to non-frontier firms (Table 1.2, Model 1).
In contrast, there is some evidence to suggest that firms that operate in premium quality markets are significantly less likely to experience a gap (Model 3). This may be because firms that focus on producing high quality products and services often cultivate a culture of continuous improvement and skills development, ensuring that employees are well prepared to meet the evolving needs of the industry. Moreover, neither being highly innovative nor selling premium quality goods or services is associated with experiencing a more pronounced skill gap (Models 2 and 4). Given these mixed findings, further research is needed to understand the link.
OLS coefficients
Note: Any size skill gap includes firms indicating skill gaps for some, few, most or all employees; Pronounced skill gaps include firms indicating skill gaps for most or all employees; Innovative firms refers to firms who very frequently or frequently lead the way in terms of developing new products, services or techniques compared to other firms in their sector (reference category is firms that innovate occasionally, rarely or very rarely); Premium quality firms refers to firms that compete in a market for premium quality products or services (reference category is non-premium quality); regressions control for firm size, industry and country; standard errors clustered at the country-size‑industry level; p-values in brackets; significance levels as follows: * p <0.05, ** p < 0.01, *** p <0.001.
Source: PIAAC Employer Module (2022).
The nature and way in which megatrends influence skill gaps varies considerably across countries, sectors, and types of firms. Some firms struggle to find workers with the technical expertise needed to operate advanced machinery or new software, while others face shortages in soft skills such as communication, problem-solving and adaptability. Identifying and understanding these specific skill gaps is crucial for policy makers who want to support firms in developing strategies to maintain their competitiveness. This section examines the different types of skill gaps faced by firms.
The PIAAC Employer Module asked employees to state up to three skill areas that need improvement in their workforce. Across countries, the following categories are most frequently identified as needing improvement: i) technical skills; ii) problem-solving skills; and iii) teamwork skills (Figure 1.5). Some notable exceptions exist, with firms in the Slovak Republic naming customer handling skills amongst the top-three gaps, and firms in the Netherlands naming customer handling and management skills amongst the top-three gaps.
Across countries, large firms are most likely to report gaps in IT professional and management skills, while small firms are most likely to report shortages in customer service and problem-solving skills. These reported skill gaps likely reflect the different needs of firms of different sizes, with larger firms requiring more managerial skills, for example. Looking at differences in gaps for firms in different industries, across all countries, firms in the communication and financial sectors are more likely to be short of IT professional and management skills, while firms in the manufacturing and construction sectors are particularly short of technical skills. Skill gaps in certain areas are likely to reflect the underlying skill needs of industries, with IT skills, for example, being more relevant to the skill needs of the services sector.
Share of firms reporting skill gaps in different skill areas, by country (%)
Source: PIAAC Employer Module (2022).
Policy makers benefit from examining skill gaps from both employers’ and employees’ perspectives, as these often diverge. Empirical research comparing these perspectives is limited. The most notable studies use matched employer-employee data from the 2006 Irish National Survey. They find that employees are more likely to identify skill gaps than employers. Further, they show that effective communication between management and employees – through mechanisms such as human resource management or collective bargaining – play a key role in aligning employer and employee views. In the absence of these structures, information asymmetries arise, with employers identifying gaps that employees may not perceive, and vice versa. Finally, they demonstrate that firm performance is affected by the degree to which employee and employer views on skill gaps coincide (McGuinness and Ortiz, 2016[2]; 2014[16]).
A study by Jackson and Chapman (2012[17]) extends the understanding of asymmetries in perception of skill gaps by comparing views of employers and academics on skill gaps in Australian business graduates. Focusing on non-technical skills, this study shows significant differences between academic and employer perceptions of graduate skill gaps, particularly in areas such as decision-making and commercial awareness, where employers rated graduates significantly lower than academics. Both studies highlight the importance of effective communication and alignment between different stakeholders to accurately identify and address skill gaps.
The Employer Module provides a valuable opportunity to examine skill gaps from the employer perspective and then compare it with employees’ perspective in the 2023 Survey of Adult Skills (OECD, 2024[18]). The two are conceptually aligned, using consistent language and concepts to assess skill gaps, with both data collections taking place simultaneously. This alignment allows some comparisons between the two perspectives and helps to shed light on skill mismatches in the workplace. However, while information on under-skilling – the employee perspective on skill gaps – can be calculated as the exact share of under-skilled employees in a country, size group and industry, information on skills mismatches – the firm perspective on skill gaps – can only be calculated as the share of firms that report having ‘few’, ‘some’, ‘most’ and ‘all’ employees with skill gaps.
To compare the skill gaps reported by employers and employees across countries (Table 1.3), one needs to consider how individuals typically interpret categorical responses. Alongside any cross-country differences in response styles, people can have different interpretations of terms such as ‘few’, ‘some’, ‘most’ and ‘all’:
Few: A small number between 1% and 10% of a group,
Some: A moderate number, between 10 and 30% of a group,
Most: A majority, more than 50% of a group,
All: 100% of the group.
The comparison between employers’ and employees’ perceptions shows that in most countries the views of the two are not particularly close, with employers more likely to report that their employees lack skills. The exception is the Netherlands, where 25% of employers report that few (i.e. less than 10%) of their employees have skill gaps and 5% of employers report that some (10‑30%) of their employees have skill gaps. Hence, the relatively high proportion of employees reporting being under-skilled (13%) is seemingly more aligned with employer views than in other countries.
Share of employers reporting skill gaps at various levels; share of employees reporting being under-skilled (%)
Source: PIAAC Employer Module (2022) and Survey of Adult Skills (2023).
There is also a significant disconnect between the areas where skill gaps are identified by employers and the areas in which employees feel under-skilled (Table 1.4). In all countries, employees cite computer and software skills as a top area where they feel lacking, yet only employers in the Netherlands highlight lack of digital skills as a top skill gap. This could reflect the fact that employees may take a broader view on their skills including anticipating future upskilling needs, while employers may be more focussed on daily or current operational needs. By contrast, while employers in most countries emphasise technical skills, employees tend to identify gaps in foreign language skills and organisational skills. This divergence points to a potential mismatch between the immediate operational needs of firms and the broader skills that employees believe are essential for their long-term career.
Employers and employees have a shared recognition for teamwork and communication skills as being important, although these are not consistently prioritised by either side. Employers in Hungary and Italy rank teamwork highly, while employees in the Slovak Republic feel most under-skilled in communication and presentation skills. This reflects a common concern about interpersonal skills, albeit with different emphasis on where improvement is needed across countries.
These results highlight a clear gap in perceptions between employers and employees, particularly around digital skill gaps. This shows the importance of skill needs assessment that draws on insights from firm management and HR, employees, and their representatives.
Top three skill gaps identified by employers and employees, by country
Source: PIAAC Employer Module (2022) and Survey of Adult Skills (2023).
The limited research that is available shows that skill gaps have a detrimental effect on organisational performance. These gaps reduce productivity, hamper innovation and increase operating costs, particularly through higher labour costs and frequent investment in training. The impact of skill imbalances more broadly has been studied extensively and shows how shortages can disrupt productivity and growth (see Marcolin and Quintini (2023[3]))
Productivity is one of the most direct and measurable areas affected by skill gaps. When workers lack the necessary skills to perform their jobs efficiently, firms experience a decline in output and often need to invest more time and resources to achieve good levels of performance. McGuinness and Ortiz (2016[2]) note that firms with significant skill gaps tend to hire additional workers or extend working hours to maintain productivity, which increases labour costs. This inefficiency can result in firms being unable to meet demand, which in turn can lead to lower profitability. For example, a study on UK firms finds that ICT skill gaps had a negative impact on sales performance (Forth and Mason, 2004[19]). In cases where a firm operates in a highly competitive market, the inability to meet production targets or deadlines due to skill shortages can lead to a loss of market share.
Beyond direct productivity losses, skill gaps can also hamper innovation. In industries where technological progress and innovation are crucial to maintain competitiveness, such as ICT or high-tech manufacturing, the lack of key technical skills amongst the workforce can be a critical bottleneck. Summarising the results from various employer surveys, Tether at al (2005[20]) show that between 30% and 40% of firms experiencing skill gaps reported that this had delayed the introduction of new working practices and between 20% and 30% reported that it delayed the introduction of new products. A Scottish survey found that 25% of firms reported that skill gaps caused difficulties in implementing technological change. Innovation, particularly in sectors that rely heavily on research and development, is linked to the ability of workers to adapt to and implement new processes and technologies. Skill gaps in these areas limit a firm’s ability to introduce new products or services, reducing long-term growth prospects.
Skill gaps can also increase operating costs. Firms may need to invest heavily in training or outsourcing to compensate for the lack of internal expertise. Although training can be an effective long-term strategy for addressing skill gaps, it also imposes short-term financial burdens, particularly if firms need to frequently up-skill or reskill workers to keep pace with industry developments. McGuinness and Ortiz (2016[2]) highlight that this approach can lead to additional costs, and without strategic planning, firms may not fully recoup the cost of their investments.
By examining data from the PIAAC Employer Module, this report provides further empirical evidence on the extent to which skill gaps affect firms, contributing to a deeper understanding of how firms are addressing these challenges. It collects information on the perceived impact of skill gaps on firms. These data are available for Hungary, Italy and Portugal as these countries opted to use this optional question of the PIAAC Employer Module.
Share of firms reporting impact of skill gaps, by country (%)
Source: PIAAC Employer Module (2022).
Almost all firms with a skill gap (99% in Portugal, and 92% in Hungary and Italy) experience some kind of negative effect. Across countries, an increase in workload for existing staff, increased operating costs and difficulties in introducing new work are the most common impacts experienced (Figure 1.6). Other top concerns mentioned by firms include difficulties meeting customer service objectives – especially mentioned by a large majority of firms in Portugal – and quality standards. While not the highest concern, about one‑quarter of firms across all countries mention losing business to competitors or not being able to take on as much business as desired, while another third faced difficulty introducing new technologies. These data together suggest that firms facing skill gaps suffer considerable business impacts that limit their ability to meet their current and future business needs. Some of these impacts also limit firms’ ability to reform work practices and adapt to technological change, hindering their potential future productivity and growth.
Across countries, small firms are more likely than medium and large firms to report: i) not being able to take‑on as much business as they would have liked; ii) a loss of business to competitors; and iii) delays in developing new products or services. While in Hungary large firms are the most likely to face increased operating costs, the opposite is true in Italy where small and medium sized firms face higher costs when confronted with skill gaps. No significant differences in effects are reported across different industries.
Surprisingly, firms with more pronounced skill gaps tend to experience negative effects less frequently than firms with less pronounced skill gaps (Table 1.5). Even when firms actively implement strategies to address these gaps – such as carrying out skill needs assessments and investing in training (Models 2 and 3) – this relationship still exists. This may indicate that firms with more severe gaps do not take corrective action because they are less affected by their negative effects. Alternatively, it may suggest that firms with less severe skills gaps are more proactive in addressing gaps before they become more severe, also because they more strongly experience their effects as negative. Further analysis is needed to better understand the link between severity of skill gaps, their consequences and strategies implemented to improve gaps.
Together, results in this chapter reiterate that identifying and addressing skill gaps remains important. Firms should develop a broader approach to workforce development that includes long-term planning, continuous upskilling and possibly redesigning roles to better match available skills. The discussion in the following chapter takes a closer look at the specific strategies used by firms to address skill gaps, such as the frequency and method of assessing skill needs, recruitment practices and the types of training provided, and how these practices differ by sector and firm size.
OLS coefficients
Note: Pronounced skill gaps include firms indicating skill gaps for most or all employees; Experience negative effects refers to firms that experience at least one negative effect (reference category is no negative effects); Use SAA refers to firms that use skill needs assessment either regularly or on an ad hoc basis (reference category is no SAA); Offer training refers to firms that offer training (reference category is no training offered); regressions control for firm size, industry and country; standard errors clustered at the country-size‑industry level; p-values in brackets; significance levels as follows: * p <0.05, ** p < 0.01, *** p <0.001.
Source: PIAAC Employer Module (2022).
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← 1. It should be noted that while the data for the Employer Module was collected in 2022 and 2023, the reference year for firms is 2020.
← 2. All analysis applies weights that scale the sample to the population level within each country.
← 3. Summary statistics by firm size, industry, firm age and market sector are presented in Annex E.