Report

The Skills Gap in US – A look at the skill gap skeptics arguments

There can be no question that American employers have a record number of unfilled jobs. For the past year, the number has hovered around 7 million. As of early January 2019, the number reported by the U.S. Department of Labor Bureau.

Faced with real numbers, skill gap skeptics make several arguments besides denying the validity of the BLS data (which, if they care to look, comes with an impressive level of rigor and backup).

First, they say that millions of unfilled jobs are the fault of employers, because there are candidates with potential but not experience who are being passed by. Data suggest that many employers now insist that candidates have already done the job, even for entry-level jobs. For instance, a recent survey found that 61 percent of all full-time entry-level openings require at least three years of experience.

Observing this phenomenon, Peter Capelli of Wharton notes that American employers have developed a global reputation for wanting the perfectly qualified candidate delivered on a silver platter—or they simply won’t hire. According to Capelli, “Employers are demanding more of job candidates than ever before. They want prospective workers to be able to fill a role right away, without any training or ramp-up time. To get a job, you have to have that job already.” Capelli calls this the “Home Depot view of the hiring process,” where filling a job vacancy is “akin to replacing a part in a washing machine.” The store either has the part, or it doesn’t. And if it doesn’t, the employer waits.

It’s true that American employers have moved the goalposts when it comes to whom they hire. But it’s also unrealistic to expect that employers can close the skills gap on their own simply by hiring legions of unskilled entry-level employees and training them up to where they need to be. Two reasons explain why. First is the increasing cost of bad hires; experts estimate that the cost of a bad hire now exceeds six months of that employee’s salary, which means companies are increasingly reluctant to take the leap with employees about whom they’re not confident can do the job.

The second reason companies are demanding better-qualified candidates upfront is the higher rate of churn for entry-level employees. Footloose Millennials are more likely to jump to another job at the first opportunity, which disincentivizes employers from investing in training. Whereas a generation ago, employers viewed entry-level hire training as an investment in their own future, today it’s seen through the lens of the free-rider problem: investing in entry-level training is more likely a gift to a company’s competitors, and hence, for suckers. It is this thinking that has produced the new status quo of “do the job before getting the job.” The upshot is that candidates who would have been snatched up a generation ago are now left sitting on the sidelines.

A second claim from skills gap skeptics is that the 6.9 million unfilled jobs are not skilled jobs, but rather low-skill jobs. This line of argument casts the “true” gap as one of labor, not skills. So while the engine of America’s dynamic economy is humming along, millions of jobs in agriculture, hospitality, and custodial services are unfilled.

BLS has relevant information on this point. Last fall, there were around 900,000 unfilled jobs in accommodation and food service, but also nearly 1.2 million unfilled openings in professional and business services, and another 1.3 million in education and health services. While some of these positions are certainly lower skill (e.g., medical assistants), a significant percentage of America’s unfilled jobs are skilled positions. According to Burning Glass, there are 1.7 openings for every qualified worker in high-skill healthcare jobs like nurse practitioners, physician’s assistants, physical therapists, and occupational therapists. The job site indeed.com alone lists nearly a million open positions with salaries at or above $75,000.

But what’s most convincing is the steady drumbeat of surveys and reports demonstrating that employers really are having a hard time finding candidates for middle and high-skill positions. As Burning Glass has recognized, “Our research shows that roles requiring highly skilled workers… are the most undersupplied roles.”

Let’s drill down on the two primary reasons why employers are leaving middle and high-skill positions unfilled: (1) They are failing to find enough candidates with the requisite digital skills; and (2) They are dissatisfied with the “soft skills” presented by candidates, even those with digital skills.

 

WHY WE HAVEN’T CLOSED THE SKILLS GAP

None of these missing skills are surprising to candidates or employers. So why does the skills gap persist? The skills gap is best thought of as the product of two distinct frictions.

On the student or candidate side, there is what I call “Education Friction.” Education Frictionmeans that because of the time, the cost and – most important – the uncertainty of a positiveemployment outcome, many individuals fail to upskill themselves. If we could eliminate Education Friction, millions of candidates would immediately equip themselves with the digital skills, industry and business process knowledge, and soft skills that employers are seeking.

On the employer side, there’s what I’ve dubbed “Hiring Friction.” Hiring Friction encapsulates Capelli’s observation: a growing reluctance of employers to hire candidates who haven’talready proven they can do the job. Hiring Friction helps to explain all the unfilled good jobs, and why employers are increasinglyrequiring years of relevant experience for positions that should be (and once were) entry level.

Any solution to closing the skills gap must address both Education Friction and Hiring Friction. And a review of the current playersostensibly in the gap-filling business explainswhy we’re not closing the gap.


Total spending on education and training is heavily weighted to the first 25 years of life. According to the Council of Economic
Advisers, most spending is exhausted by age 17, and more than 90 percent of spending is complete by age of 25. The prevailing view has been to position postsecondary education as a kind of “all you can eat in one sitting” buffet: get it done, then get to work.

Chosen excerpts by Job Market Monitor. Read the whole story at  America’s skills gap: why it’s real, and why it matters

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