Is the Skills Gap Real?

Employers say they’re struggling to find qualified candidates to fill open jobs, but are their expectations of available talent too high?
skills gap

When companies face difficulties filling open roles, whose fault is it? Are prospective candidates not seeing the listing? Or are the candidates out there just not qualified for the role?

Many business leaders cite the skills gap — a mismatch between the skills needed and the talent with the right skills — as the main reason for their troubles. There are constantly new technologies disrupting the skills needed to perform certain roles, but can’t businesses just train new hires? There are more than 5 million open roles and about 7 million people unemployed, so aren’t there enough people to fill these jobs?

Conundrums like these are why some experts feel the magnitude of the skills gap is overblown.

Why Might There Not Be a Skills Gap?

Unemployment has been steadily declining since 2009, when it was at 10 percent in October of that year, while it now sits at 4.4 percent, according to the Bureau of Labor Statistics. Economists consider this full employment, a sign of economic security. However, wage growth is stagnant. “Simple microeconomics 101 suggests that employers should be willing to pay up for scarce labor,” said Josh Wright, chief economist at iCIMS, an HR software company in Matawan, New Jersey. He said that some argued the skills gap was to blame for elevated unemployment just a few years ago, and today’s full employment counters that argument’s persistence.

Skills gap skeptics also say that employers will always complain about their candidate pools. “Others argue that employers adjust the requirements in their job descriptions depending on current labor conditions, ensuring a perennial gap,” Wright said.

Also, it could be a gap between what business leaders think they want and what they think is out there, said John Marthinsen, professor of economics and international business at Babson College. “There really is no consensus about this idea of a skills gap,” he said.

Why Might There Actually Be a Skills Gap?

Marthinsen listed a few reasons why employers feel a gap between skills required and skills available:

  • Baby boomers are retiring en masse, taking knowledge with them.
  • Technological advancements require new skills on the job market and educational systems struggle to keep up.
  • Global competition means companies feel added pressure to perform, requiring top talent.
  • Educational quality in the U.S. is good, but business leaders might feel that other countries have advantages and are advancing faster.
  • Businesses might invest in training and reskilling their workers less than in the past, as frequent talent movement lessens the return on investment of that educational spend.

Business leaders are feeling these forces on their bottom lines. CareerBuilder’s recent survey with Harris Poll found that 55 percent of employers experienced negative business impacts due to job vacancies, with 45 percent reporting loss in productivity and 37 percent seeing lower-quality work. This is costing businesses an average of $800,000 per year, the report said.

This headache is in many industries, and the issue isn’t limited to just the U.S. Hays PLC, a global recruiting firm, indexes talent markets globally on seven indicators that measure pressures on local labor markets. In 2016, its “Global Skills Index showed the labor market tightening in the U.S. and Europe. Sweden faces the tightest market and a high mismatch between skills held by talent and skills needed by businesses. The U.S. is closely behind Sweden, though the score improved only slightly between 2015 and 2016.

This problem has been brewing for a few decades, said Carolyn Lee, executive director of Manufacturing Institute, the nonprofit affiliate of National Association of Manufacturers, a Washington, D.C.-based advocacy group. “This isn’t a new issue,” she said, indicating that Manufacturing Institute first released a report on the skills gap in 2001. The growing concern in recent years and variety of contributing factors makes skills gaps hard to repair, but “I don’t think it’s an insurmountable problem,” Lee said.

Who Bears the Responsibility?

The burden to repair the gaps between business and available talent falls on many parties, said Ravin Jesuthasan, managing director and global practice leader at Willis Towers Watson, a research and advisory firm headquartered in London. Educational institutions need to retool to move beyond merely providing technical skill development to developing the enabling competencies and mental agility that will increasingly be required of individuals, as technological advancement requires lifelong learning. Government needs to actively engage in providing the incentives and infrastructure needed to support and encourage companies to invest in reskilling, as no company can do this alone. Companies also need to provide transparency as to how their demand for skills is changing along with access to development opportunities, Jesuthasan said.

ICIMS’ Wright echoed that call for transparency and development, encouraging business leaders to participate in studies by sharing data on their training programs. He said this will help experts understand what businesses are doing behind the scenes and offer suggestions on how to improve.

RELATED: With Some Hires, Less Industry Experience Is More

Businesses can also partner with educational institutions and workforce development agencies to improve talent pipelines, Wright said. Apprenticeships are one area ripe for success. These partnerships can also include working toward an identification of standards for training and advice on development. “Standardizing that information and encoding it in certifications or other credential programs can give educators and workers reassurance that making the investment to pursue those particular skills will pay off, as well as make it easier for employers to identify those skills in job candidates,” Wright said.

Some business leaders might be hesitant to train talent. Why invest in this area, only to have workers leave and take their knowledge with them? Wright said there are ways to reduce that risk, such as providing incentives to participating employees. If companies are concerned about competition poaching these newly trained workers, Wright suggested the firms join forces, collaborating on training programs together.

Finally, Babson College’s Marthinsen said, it’s not fully incumbent on the company to upskill workers; it’s the duty of the individual to participate in lifelong learning, as well, and there’s no greater payoff than education. Workers should make themselves as universally employable as possible by gaining desirable skills, that way, when a new technology comes along, it’s easier to grasp, he said.

The importance of emotional intelligence over industry knowledge is an area that individuals should work on, said Rosemary Haefner, chief human resources officer at CareerBuilder, a human capital solutions company based in Chicago. When graduating from academic institutions, are these people employable? Can they work in a team? Can they give and receive feedback?

And of course industry knowledge is still important. Many workers today feel pressure to upskill as the technical competencies they hold have begun to lag. “The individual also bears some responsibility to keep themselves fresh and engaged and forward-thinking for their occupation,” Haefner said.

Lauren Dixon is an associate editor at Talent Economy. To comment, email editor@talenteconomy.io

Update: Manufacturing Institute’s description has been updated to reflect that it is the nonprofit affiliate of National Association of Manufacturers, not a division of the association, as previously stated.