Exploring the Skills Gap

Is It Real…and If So, How Do We Fix It?

Exploring the Skills Gap
December 17, 2014

Unemployment in America has been slowly receding, dropping from a seasonally adjusted peak of 10% in October 2009 to the rate of 5.8% five years later. However, government agencies are still concerned about the amount of underemployment (people in part-time jobs or jobs below their training) and potential employees who have left the workforce – and rightfully so.

The more comprehensive U-6 unemployment rate is also dropping, but is still at 11.5% – a number not seen since January of 1994. One potential reason for this may be the so-called “skills gap”, a situation where the available workforce in the area does not have the right mix of skills that the local industry requires.

According to a recent report from the Organisation for Economic Cooperation and Development (OECD), only fourteen states in the U.S. have a “high-skills equilibrium” – a general balance of workers with greater than high-school education, available medium to high-skill jobs that require such an education, and a reasonable wage for those jobs.

This end of the skill spectrum is important. Higher-skill jobs tend to contribute more to overall economic growth, due to being in more innovative fields as well as paying predominantly higher wages that trickle down to support nearby restaurants and shops. Mismatches on the low skills end are not desirable, either – but they do not have the same effect on further job and wealth creation.

How do we fix the skills gap? First, we have to agree that it even exists, and if it does, how can we better define it?

The latest Manpower survey concluded that 39% of U.S. employers had problems finding talent to fill their available jobs. Small and midsized companies are having an even tougher time, with 53% of small business leaders facing a “very or fairly major challenge” in recruiting certain employees, according to a study by the U.S. Chamber of Commerce. Other surveys echo this general representation of the skills gap.

Meanwhile, noted Economist Paul Krugman wrote in the New York Times that the skills gap is “a zombie idea” that “should have been killed by evidence, but refuses to die.” Peter Capelli, Professor of Management and Director of the Center for Human Resources at The Wharton School, has suggested surveys such as the ones above may represent “employer whining.” The current high level of underemployment and overall flat wages seems to back their argument.

Who is right? Both are, in a way.

To us, it seems that the skills gap is real on the micro scale. There are localized areas where high-skills jobs are going unfilled because people with the right type of high skill are not available in their area. Meanwhile, businesses are either reluctant to take on retraining costs or cannot afford them (depending on the size of the company involved – and in part on who you ask).

Attempting to look at the broad picture in this case seems to miss the areas, both geographically and in sub-specialties within a field, where the skills gap does exist.

For a simplified example, consider the multitude of experienced computer science graduates and experienced coders. How many of those have knowledge of cutting-edge programming languages? Keeping abreast of new advancements is tough if those new skills are not part of your current job.

If your job becomes obsolete and new programming skills are required, in the macro sense, you have high-skills training – but in the micro sense, you do not.

You must retrain yourself and convince an employer to take a chance on you. Unfortunately, your experience level puts you behind the eight-ball as your salary history does not fit with your newly acquired skills. Thus, you join the underemployed crowd as an over-trained barista at Starbucks.

Retraining appears to be the major part of the answer. It is just a question of who pays for it, and how to do it in the most efficient fashion.

Businesses blame schools for poor preparation for today’s high skill jobs. This is partially true – but the high-skills job environment often requires skills that are evolving and difficult to teach without direct involvement of the business. Cooperation with universities, internships, and mentoring programs must be a driving force in solving the problem.

Let’s hope businesses find a way to work with these resources instead of merely complaining about their poor performance. Otherwise, expect the skills gap to grow and mutate, and leave no argument about whether it exists.

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