Economics – Government and the macroeconomy - Supply-side policy | e-Consult

Introduction: Skills shortages can significantly constrain economic growth. Supply-side policies aimed at improving the skills of the workforce are crucial to address this.

Increased government spending on vocational training: This policy directly addresses skills shortages by providing individuals with the practical skills needed for specific jobs.

• How it helps: Vocational training can equip people with the skills demanded by employers, reducing the skills gap. It can also provide opportunities for reskilling and upskilling, allowing workers to adapt to changing job requirements.
• Potential drawbacks: The effectiveness depends on the quality and relevance of the training. It needs to be aligned with the needs of employers. There is also a time lag between training and employment.

Changes to the education system to encourage more students to pursue STEM subjects: This policy aims to build a pipeline of skilled workers in science, technology, engineering, and mathematics (STEM) fields.

• How it helps: By making STEM subjects more appealing and accessible, the education system can increase the number of graduates with the skills needed for high-growth industries. This can address long-term skills shortages.
• Potential drawbacks: Changes to the education system take time to have an impact. It requires investment in teachers and resources. There is also a risk that the curriculum may not be relevant to the needs of employers.

Incentives for older workers to remain in employment: This policy leverages the experience and skills of older workers to reduce skills shortages.

• How it helps: Incentives such as tax breaks or flexible working arrangements can encourage older workers to stay in the workforce longer. This can help to fill skills gaps and reduce the burden on younger workers.
• Potential drawbacks: Older workers may have different needs and preferences than younger workers. It is important to ensure that they are not being exploited or discriminated against. There may also be concerns about age discrimination.

Conclusion: These policies offer different approaches to addressing skills shortages. Vocational training provides direct skills development, while changes to the education system focus on building a future pipeline of skilled workers. Incentives for older workers leverage existing skills and experience. A combination of these policies, tailored to specific skills shortages, is likely to be the most effective way to address this issue.