What’s the Real Reason for the Skills Gap in the U.S.?

Our special section on talent acquisition in Talent Management magazine’s January issue featured a piece titled “The Skills Shortage,” which broke down various reasons why companies today can’t find the talent they need – or at least say they can’t. It’s a question that begs to be answered; with unemployment hovering around 8.5 to 9 percent, you’d think companies would have no problem filling jobs.

In the piece, Peter Cappelli, the George W. Taylor Professor of Management at The Wharton School, asserts “there is nothing wrong with the workforce.” The problem, he says, comes down to wages; that to get the right talent, employers need to increase what they’re willing to pay – something they’re apparently not willing to do. Cappelli draws this analogy:

“Consider how silly that would sound in another context. A man is looking for a new television. He announces to the store that what he is willing to pay is good enough even though the store won’t sell the TV at that price. Then he goes outside and announces there is a shortage of TVs because he can’t get one at the price he is willing to pay.”

According to Harry Holzer, a professor of public policy at Georgetown University, this is many economists’ traditional answer to the question of the skills gap: raise pay. But he points out this is impractical, first because employers may be under competitive pressure to keep costs down.

“Secondly, raising wages alone doesn’t magically create a supply of skilled workers,” he said. “It raises the incentives of workers to invest in those skills, but that’s a slow, imperfect process.”

However, Holzer doesn’t deny that the high amount of open positions is surprising. “There are a higher number of vacant jobs than you would expect to see at this point in the business cycle, and especially in some sectors like manufacturing, the ratio of vacant jobs to filled jobs, to new hires, is pretty high,” he said.

So, again, what accounts for this disparity? A Web article published by MSNBC earlier this month titled “Role reversal: Employers say they can’t find workers” points to a survey by staffing firm Manpower Group that found 52 percent of employers report they’re unable to find workers qualified for a given position. The MSNBC article comes up with a number of explanations for this, among them, “Employers may not be looking far afield because they can’t afford moving expenses. Employees may be less willing to move because of the housing bust.”

That’s the primary explanation given by Dave Mendoza, talent strategist at data integration software company Informatica. “People who would otherwise be interested and feel that their job is at risk or that it’s time for them to move on can’t make those decisions based on the simple economics of the fact that their houses are under by several hundreds of thousands of dollars,” he said. “Those who would like to get a great opportunity to be willing to make a move to say a New York or an L.A. or a Chicago, they can’t make that move because they can’t [renegotiate] to get a [refinance] on their existing house that’s underwater, and companies aren’t willing or can’t afford to make packages that could make up for the difference.”

Holzer agreed this could be part of the reason for the gap, and pointed at unemployment insurance as another factor potentially disincentivizing people making themselves available for open positions for which they might be uniquely qualified. But he pointed at another factor; one likely of large interest to readers of our sister publication Chief Learning Officer.

“In some cases it just reflects the fact that there’s a certain category of skills that we in the United States haven’t been very good at generating,” Holzer said. “We don’t have a lot of high-quality career and technical education in the U.S. the way the Germans and some other industrial countries do. And employers are reluctant to invest in that training on their own.”

This is where Cappelli ended his argument in our article on the skills gap; he asserts the solution is employers returning to “hiring and then training.” Employers, he says, need be willing to hire candidates who are not the perfect fit but could grow into open positions with training and time. But in this economy, that’s not the trend; employers are looking for people who can hit the ground running.

And that is really the biggest issue staring us in the face here; it’s still the economy, stupid. “When you have 8.5 to 9 percent of unemployment, that’s still the biggest problem,” Holzer said. “I think the biggest problem right now remains a lack of jobs and a lack of demand rather than some kind of mismatch.”

So what do you think? Have you had difficulty filling open positions in your company? Where you have, has that come down to salary demands, an inability for potential employees to move or a lack of the right skills in the candidates you’re interviewing? And do you think the skills gap is a problem in and of itself or a symptom of the still-struggling economy?