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Skills shortage driving unemployment

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Unemployment is rising, with stakeholders in the labour market saying there is a mismatch between vacancies and jobseeker skills, as employers cannot find qualified staff.

A recent CyStat survey showed the number of unemployed registered at the District Labour Offices in December reached 16,132, increasing 9% annually.

Seasonally adjusted, the number of unemployed drops to 14,081.

Compared to December 2021, an increase of 1,332 or 9% was recorded, attributed mainly to the sectors of accommodation and food service activities (+608 persons), financial and insurance activities (+567), transportation and storage (+145), information and communication (+74) and human health and social work activities (+65).

The unemployment rate in Q3 2022 was 6.8%, up from 6.6%.

Talking to the Financial Mirror, the head of the Cyprus Fiscal Council, Michalis Persianis, attributed unemployment to a mismatch of skills in demand.

“We are witnessing a constant increase in the number of unfilled job positions in the last few years, especially in the ICT and health sector,” said Persianis.

“It is also worth noting that in sectors like manufacturing, the increase in unfilled job positions has been steady since 2018.

“We see a clear shift in the Beveridge curve, comparing the level of unemployment with the percentage of unfilled job positions.”

He argued that while the economy has had low unemployment, at the same time, the number of job vacancies has been on the rise.

“This is true even after correcting for the outlier years (2020-2021) when many workers dropped out of the job market, and businesses in some sectors slowed down significantly due to the well-known effects of the Pandemic”.

Persianis said the mismatch of skills is directly tied to the leap in technological advancements that the workforce has not caught up to.

“As businesses adopt new technologies, staffing relevant positions is increasingly difficult.

“This is especially true in Manufacturing where we do see new technologies and some growth in productivity that comes with them, but this is happening in tandem with a shortage of needed skills in the job market”.

He said that the skill gap is “more evident in the case of ICT, where the significant growth of high-tech industries aggravates the jobs mismatch – new businesses starting up or migrating to Cyprus, new services offered and new business activities developing rapidly alongside new technologies”.

Education

Persianis argued that cultivating IT skills at a younger age would go a long way in closing the skill shortage.

“Although the levels of tertiary education completion in Cyprus are noticeably high compared to other economies, this is of little consolation, as technological advancements have not been considered.

“Positions like Front End (or Back End) Developers, for example, were completely unknown a few years ago, and the tertiary educational system does not provide explicit training for such jobs.

“We do see a chronically low level of STEAM (Science, Technology, Engineering, Arts and Mathematics) education in Cyprus, which translates to a longer-term shortage of such skills, even as they continue to become increasingly important for the economy”.

Persianis believes the gap in tech skills could hinder Cyprus’ efforts to attract Big Tech to the island, despite its recent good record.

“The arrival of big tech companies is a clear positive as the Cypriot economy is injected, not only with new services and products but also with new skills”.

The challenge will be to bring skills in line with the needs of a growing high-tech industry.

“As long as foreign businesses depend on importing labour for their needs, the diffusion of know-how, skills and even ideas into the economy will remain limited”.

The number of unfilled jobs is also driven by increasing needs in healthcare as the new General Health System has changed the industry, while the ageing population has increased needs.

“On the one hand, STEAM and healthcare need to be encouraged and showcased more in secondary education, aiming to increase student uptake in such areas of study, especially among those who later study abroad.

“On the other, local universities must be encouraged, perhaps with a tax or other incentives, to improve both their capacity and quality of relevant fields of study.”