Worsening Skills Deficit Requires Companies To Act
Like most growing economies, the United States relies on a steady flow of well educated workers. In fact, without this, the U.S. never would have become an innovative powerhouse. Today, the newest technologies on the scene, including cloud storage and faster computing, apps, hydraulic fracturing, 3D printing, energy storage, and nano technology, require more knowledgeable and highly skilled employees to develop, refine and operate them. But where are these workers?
In late 2013, the Dallas Federal Reserve identified an "acute labor shortage" in a variety of job categories. And a 2014 report published by Accenture, a global management consulting firm, and the Manufacturing Institute, the research arm of the National Association of Manufacturers, indicated that more than 75 percent of manufacturers surveyed indicated a moderate to severe shortage of "skilled" labor, while more than 80 percent of respondents reported a moderate to severe shortage of "highly skilled" labor.
In an August 2014 article, Stephen Moore, an economist and former member of the Wall Street Journal editorial board, said there are at least one million jobs overall that can't be filled in the United States due to a lack of skills. And these jobs are not necessarily the most sophisticated either. Moore also identified various medium skilled positions, like truck drivers, and estimated there were 30,000 to 50,000 too few to run long haul routes. In sum, the shortage, at all skill levels, will get worse as the economy improves and the need for workers grows.
To a large degree, the future success of American businesses depend on their ability to find talented employees who can think critically, solve complex analytical problems, learn new skills quickly, and implement increasingly sophisticated technologies. Consider this: the iPhone 4 offers roughly the same performance as a $5 million 1975 supercomputer, says James Manyika in a report published by McKinsey Global Institute. As technology becomes more sophisticated, the depth and range of skills required by employees only will increase. But that's not all.
More employees must be well versed in the ways of the world, not just in ways of the United States.
Today, a greater share of economic growth is occurring outside the United States. And why not? The U.S. population only represents 4.4 percent of the world's population. To reach the other 95.6 percent, U.S. firms need to expand internationally. In turn, global business and investment is becoming a significantly more important factor in the creation of new economic growth here in the United States.
As a result, more employees must be well versed in the ways of the world, not just in ways of the United States. Consequently, it is imperative that employees have an understanding of foreign business, economics and politics, as well as foreign cultures and languages.
What functions may be required? A purchasing manager in a U.S. manufacturing multinational, for example, may be required to source inputs from around the world to support its production facilities in Asia and North America. To do this, the employee would need advanced skills in a host of information technologies, the ability to coordinate the activities of colleagues and business partners in a global network, and very likely, formal education in foreign languages.
Multiple factors are contributing to the worsening skills deficit. For instance, baby boomers, those born between 1946 and 1964, continue to retire in droves. The problem: they are taking their skills with them. In addition, after reaching their highest labor force participation rate of 60 percent in 1999, participation among women has declined, according to the U.S. Bureau of Labor Statistics.
Furthermore, the U.S. Census Bureau says the mobility of adults aged 25 to 29 is at a 50-year low, largely a result of the Great Recession and the ongoing period of slow economic growth. Consequently, fewer young people have been able to relocate to seek or accept new jobs.
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Moving forward, to find and retain the best candidates, employers need to act now. Many will need to create more attractive working conditions and compensation programs. But that's not all.
Today's accelerated skills cycles, which already have fallen from years to just months, are forcing employees at every skill level to engage in the practice of life-long learning. In turn, companies will need to invest more in employee training programs and continually refresh and upgrade employee skills.
And to a greater extent, companies will need to team up with local universities, community colleges and trade schools to ensure educational strategies emphasize critical thinking over rote memorization, and that the courses offered satisfy market demands. And we certainly can learn from the Europeans, where 70 percent of the youth age 15 through 19 in Switzerland, 65 percent in Germany, and 55 percent in Austria are involved in apprenticeships covering hundreds of occupations, says Peter Downs in a 2014 Wall Street Journal article.
Due to the absence of qualified job candidates, many companies are attempting to automate as many functions as possible, while others are drawing on an relatively untapped tremendous human resource: older workers. Keep in mind that Americans are living longer, healthier lives and are able to contribute well after their first retirement.
This article appeared in International Insights, a Fifth Third Bank publication.