Dean Barber

So How Real is this Skills Gap?

In Site Selection on November 16, 2014 at 9:10 am

A few weeks ago, I attended the annual conference of the National Association of Industry Specific Training Directors in beautiful Colorado Springs where I was invited to speak.

I gave a presentation on how we are just now entering a new revolutionary age of digital technologies in which there will certainly be winners and losers in terms of employment.

Mine was a stark view of the future, not necessarily pessimistic but not without controversy. I would guess that most economists would not agree with me. They would take a more traditional view that automation which eliminates the use of labor increases incomes, which in turn generates demand for new products and services, which in turn creates new jobs for displaced workers.

Well, I believe that theory holds partly true, but it doesn’t tell the whole story. Abraham Lincoln tells of half and full measures.

“I heard a good story while I was up in the country. Judge D was complimenting the landlord on the excellence of his beef. I am surprised,’ he said, that you have such good beef. You must have to kill a whole critter when you want any.’ Yes,’ said the landlord, we never kill less than a whole critter.’ ”

In trying to figure out what’s true and what’s not, I’m not sure I can always offer the whole critter, but we’ll do our best. So bear with me.

A Regional Shortage

When I was attending the NAISTD conference, I learned that there is probably of shortage of 12,000 welders along the Alabama/Mississippi Gulf coast due primarily to the increase in ship building and marine fabrication in that region.

Now there is no reason for me not to believe that this is so. My friend, Ed Castile, director of the Alabama Industrial Development Training, one of the best state sponsored worker training programs in the nation, told me so. And his counterparts in Mississippi confirmed as much.

When I do site selection consulting for a corporate client and economic development consulting for a community, I’m looking for a sustainable pipeline of talent, resulting in both quantity and quality in terms of particular skill sets.

Generally speaking, it is those places that can provide the quality and the quantity, along with that often vague notion of quality of life (it’s different for different people) that will win out.

But here’s where I differ from conventional thinking, and I considered talking about this at this at the NAISTD conference. I happen to believe that fears of the much talked about “skills gap” in the near term are largely exaggerated.

Now that is not to say that companies don’t have trouble finding people for specific jobs in specific industries in certain locales. I’ve run across that before on site selection projects, as no community can be everything to everybody.

A Crisis in the Making?

But if you listen to business community (and I do), this a crisis in the making. In a U.S. Chamber of Commerce study, 53 percent of leaders at smaller businesses said they faced a “very or fairly major challenge in recruiting non-managerial employees.”

In a survey of Inc. 5000 CEOs last year, 76 percent said that finding qualified people was a major problem.

But before we get ourselves worked up, let’s look at the numbers. There were 4.7 million job openings in September, little changed from 4.9 million in August, which was a 13-year high, according to the U.S. Labor Department. We also know there are 9 million Americans actively looking for work. (We’re not counting the discouraged workers who quit looking.)

Politicians and employers explain this disparity by pointing to a skills deficit. But since 2007, the widening gulf between job openings and hiring has come primarily from the retail, hotel and food service industries, where no more than a high-school diploma is generally needed.

Stagnant wages raise further my doubts. If employers were really struggling to fill openings, don’t you think they would be willing to pay more? The fact is that high-school graduates have actually seen their wages fall over the past decade when adjusted for inflation.

What’s more, an increasing number of university graduates are taking jobs historically reserved for lesser-educated people. A Federal Reserve Bank of New York study found that roughly 44 percent of recent university grads are in a job that does not demand a bachelor’s degree.

The Real Problem

Last year, the Boston Consulting Group concluded there is no empirical data at the national level of an economy-wide mismatch between employers’ needs and people’s skills.

“Our research finds little evidence of a meaningful and persistent skills gap in most parts of the U.S., including in its most important manufacturing zones,” BCG stated in its report.

“The real problem is that companies have become too passive in recruiting and developing skilled workers at a time when the U.S. education system has moved away from a focus on manufacturing skills in order to put greater emphasis on other capabilities.”

So why the disconnect between manufacturers’ perceptions and reality?

“Quite often, the skilled workers are available, just not at a price employers are willing to pay, or companies do not bother to recruit at community colleges and vocational schools,” said Harold Sirkin, a senior partner with BCG and a co-author of the “U.S. Skills Gap” report.

“In other instances, experienced skilled workers with good academic training are available, sometimes in-house, but companies are unwilling to invest the time and money to train these workers to use new technologies or specific machines.”

The Blame Game

Here’s another clue that the skills gap is overblown: About 8 percent of executives surveyed said they were considering moving out of the U.S. because of issues related to skills. But almost five times that many were considering moving back to the U.S. because of the presence of skilled labor.

Says Peter Cappelli, an economist at the Wharton School’s Center for Human Resources: “The only evidence of the skills gap is employers saying ‘I’ve got a problem.’ ”

As a consultant, when a client tells me they have a problem, I have to take that to heart. Manufacturers typically blame the education system, saying that half their applicants can’t perform simple math or that applicants don’t have a good work ethic.

I get that. I hear you loud and clear. But you have to be prepared to step up to the plate to help yourself in developing a skilled workforce. Don’t just bitch without acting. Now why do I say that?

Now What Are You Doing About It?

The U.S. had 200,000 fewer active registered apprentices in 2013 than in 2003, according to the Labor Department. (The rate is also less than a 10th of Britain’s.)

What’s more, in late 2011, only 21 percent of U.S. workers surveyed by Accenture said they had received any formal training at work in the previous five years. According to Training magazine, the share of GDP spent on instruction fell from 0.52 percent in 2000 to 0.34 percent in 2012.

Matt Ferguson, CEO of CareerBuilder, surveyed more than 2,000 employers and estimates that 80 percent of them say they are concerned about a skills gap, but only 40 percent are doing anything about it.

There are sensible solutions at hand. They include starting in-house training programs, paying competitive wages, and working with local government entities and community colleges. But again, a minority of companies are actually taking matters into their own hands.

Instead of waiting for businesses to take the initiative, some community colleges are trying to address local training gaps.

Monroe Community College in Rochester, NY., helped local manufacturers find machinists by establishing an accelerated machining program. Faculty identified the needed skill gaps through intensive data research and surveying employers.

Perfect is as Perfect Does

Finally, many companies hold out for the “perfect candidate” and use screening software that filters out otherwise-qualified people who just don’t have the right title or buzzword in their online résumé. Or they might have six years’ experience instead of seven.

According to a 2013 Career Advisory Board survey of 500 U.S. hiring managers, 67 percent said they “don’t feel like they have to settle for a candidate without the perfect qualifications.”

Perfect is as perfect does, and I submit that’s not a real world view. Investing in your people, training them, giving them new skills to employ the latest technologies. That’s not without risks or costs, but can you ultimately afford not to do it?

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. http://www.barberadvisors.com

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

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  1. Good article Dean.

    Two additional and related thoughts:

    In some instances the problem is a mismatch between where the jobs are and where the people with the necessary skills are. At one point – probably still true today – we had a surplus of skilled welders in CT due to cutbacks at Electric Boat, because orders for nuclear submarines dropped off significantly. But the welders and their families didn’t want to move.

    On top of that, even those who did want to move couldn’t afford to because of the decline in home values, leaving them underwater on their mortgages.

    So it is a complex problem with more variables than most people realize.

    Hope all is well. If you ever get a speaking gig you can’t fit in the schedule, keep me in mind. Sitting in Charlotte on the way to Indy for EDI.

    Regards–

    Mark

  2. The truth is that we really just don’t know if there is a skills gap because we don’t know and understand enough about what employers need and want (and it is true that often the problem is that what they need and want is unrealistic..especially at the wage they are willing to pay).

    The only way we are going to fix this is by sitting down to talk with employers BY INDUSTRY SECTOR. We need to understand the deficits in each industry. Government should not be in the business of supporting training programs for individual businesses who just don’t want to expend the money to do the training needed on their own. However, government should be in the business of facilitating conversations between entire industries and educational entities to see how particular industry sectors (and clusters) can be grown in particular regions.

    Doing these industry sector studies is tricky business. It requires competitors to sit down at a table together to share their common problems. Often it requires follow-up conversations with individual businesses who are reluctant to share what they may perceive as proprietary information. But looking at a whole industry in a given region is the only way to make heads or tales abut what is really going on.

    Now, add to this complexity that these industry sector studies, done effectively, require workforce development and economic development to collaborate…to actively share business intelligence about their region together. I recommend a shared crm…and my favorite is called “talent crosspoint” which brings more than just a crm, but additional analysis based on thousands of executive interviews from across the country.

    There is also a need for the workforce system to stop training people for what their Dept. of Labor tells them are “high demand jobs.” Just because there are a lot of wanted ads for a job, does not mean it is in high demand. There can be lots of reasons that employers post help wanted ads…such as gathering data about competition, evaluating future supply of workers etc.

    Instead the workforce system should be working again closely with the industry in that region and helping educators to develop curriculum specific to the needs of employers. And, I will take this a step further…in New Jersey, the Community College Consortium of workforce and economic development is having employers interview applicants BEFORE they put them into training to assure a prospective job before the training dollars are expended!

    There is plenty of blame to go around…but the good news is, there are plenty of fixes to go around too. As a workforce development consultant, I have started working with Camoin Associates, an economic development firm, to help regions create sector strategies and to develop better communication strategies between workforce development and economic development so that they can better guide the training needs for major industries in their regions.

  3. I would be interested in your thoughts regarding any perceived/real skills gap in the computer programming, and how that issue relates to Silicon Valley’s desire to bring in more skilled immigrants with computer programming background.

    Best regards,
    Don Erwin

  4. Thanks for your comments. Responsibility for a qualified, trained workforce definitely goes both ways. You have totally summed up the issues I hear in our community. Unfortunately another issue is governmental assistance outweighs the desire/necessity to work-steadily. There are also issues with candidates passing drug screens. There is definitely an employment problem in addition to an unemployment problem.

    Sent from my iPhone

    >

  5. Don, I have been doing some research into the H1b visa program and am frankly appalled by the lack of monitoring, oversight and vagueness of the skill requirements from the Department of Labor for this program as well as the obvious outright abuse of the visas by outsourcing companies and many corporations. I am writing a blog post about this next week and will be happy to share with you when I do.

  6. Good observations in this blog! Very good. I hope all is well in your world.
    Charlie

  7. I am firmly convinced that there is a shortage of welders, plumbers, electricians, and other tradesmen/women regionally. Some of the reasons have already been identified as to the mobility of this workforce. But I do think the business community has gone a little overboard on the job qualifications process and does indeed screen out qualified workers because the lacking skill may actually not be needed for a specific job. What would you tell the person at Walgreens who hired “John”, not his real name, for a receiver at the warehouse. John is mentally challenged and is proud to say he can receive 10 cartons a minute. When the SVP asked him, since they measure productivity in hours, how many can he do in an hour or 60 minutes. John readily admits he does not know. He can’t multiply 10 times 60. But he is receiving 600 units per hour and the standard is 450. I would hire John any day for my receiving person. Who cares he can’t multiply. Maybe he can’t diagram a sentence either but lacking those skills does not impact his ability to do that specific receiving job. He is great at his job. How many of our “standardized tests” filter out excellent workers? Maybe we should do like Walgreens does now and match every employee’s individual skills to every single job they are assigned to. In that environment, they excel. They do not mismatch employees because they know they will fail.

  8. All of these factors come down to hands on work. Relying on the Departement of Labor is far too risky to put the future of a business in their hands due to the inadequate speed and accuracy of the work involved, it would be too risky for a company to give up information that could threaten proprietary information to competitors, and computers overlook those just outside of the given margins.

    So the answer would be going back to developing the people that are within the ranks, being hands on with the supervisor/manager/foreman as to the hiring decision, and being less technologically dependent. Getting back to the hands on dirty work of the hiring, training, and developing will alleviate much.

    Outside of much of the skilled would be to encourage those with degrees to become entrepenuerial like the country was founded on. Thereby creating positions and opening others to those who can best utilize them.

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