Is the Skills Gap Real?

by Lauren Dixon

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 roughly 4.3 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.

Why Might There Actually Be a Skills Gap?

John Marthinsen, professor of economics and international business at Babson College, 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. 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 felt in many industries — and not just in 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.

Educational institutions need to retool to develop the mental agility that will increasingly be required of individuals.

Who Bears the Responsibility?

The burden to repair the gaps falls on many parties, said Ravin Jesuthasan, managing director and global practice leader at Willis Towers Watson, a research and advisory firm.

Educational institutions need to retool to move beyond providing technical skills to developing the enabling competencies and mental agility that will increasingly be required of individuals. 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.

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.

Still, it’s not fully incumbent on the company to upskill workers; it’s the duty of the individual to keep learning as well.

“The individual also bears some responsibility to keep themselves fresh and engaged and forward-thinking for their occupation,” said Rosemary Haefner, chief human resources officer at CareerBuilder, a human capital solutions firm.