Labor shortage threatens U.S.
Every day in the U.S., seven million jobs go unfilled because companies cannot find skilled workers. That number will, under conservative estimates, double in the next six years to 14 million.
This skills shortage, which is already engulfing certain industries, will soon lead to a nationwide economic meltdown unless we take action, warns Edward E. Gordon in his new book, "Future Jobs: Solving the Employment and Skills Crisis" (Praeger, September 2013). However, he says, there is still time to stave off a crisis.
In this Q&A with EBN, Gordon puts the problem in stark relief and outlines the steps employers need to take to keep themselves and America competitive.
You state in "Future Jobs" that U.S. employers and employees headed for a "jobs skills cliff." What do you mean?
The United States and the world are locked into a structural labor market race between advanced technology on one side, and demographics and education on the other. By the end of this decade, many businesses will no longer have the talent needed to sustain themselves.
In 2020, the United States can expect a skilled talent shortfall of between 14 million and 25 million workers to fill new and replacement jobs. Between 2020 and 2030, high to very high talent shortages are predicted across the United States in many economic sectors, including IT, business services, health care, public administration, education, financial services, hotels and restaurants, transport, communications, trade, construction, manufacturing, utilities and other businesses. Such a scenario will devastate the entire economy and may create an expanding poverty cycle that could lead to social unrest.
Describe the jobs situation HR professionals will face in just six years.
The job market will be sharply and unevenly divided. Seventy-five percent of the available jobs will require higher skills and offer higher pay. Approximately 122 million workers will be needed to fill them. However, the available talent pool will have only 98 million workers - 55 million who are qualified and 43 million who are semi-qualified if further trained. At the same time, only about 25% of the available jobs will need lower skills and offer lower pay. About 41 million workers will be needed. However, 64 million Americans will possess only low skills.
Why are we facing such a tremendous skills gap?
The American education-to-employment system is largely failing to prepare more people with the required skills to compete in this new labor market era. Laid-off workers often lack the skills to move into jobs in growing sectors of the economy. Businesses and government job training programs are largely inconsistent, short term or too generic. Too many younger workers lack general education and specialized career skills, let alone a strong work ethic, to sustain a middle-class standard of living. They are now adding to the growing American "underclass."
In 1990, the Organization for Economic Co-operation and Development ranked the United States first in the world in the percentage of 25 to 34 year-olds with college degrees. By 2010, we had slipped to 14 among OECD nations. Anthony Carnevale at Georgetown University has projected that by 2018, Americans will produce three million fewer college graduates and 4.7 million fewer post-secondary certificate graduates than the economy will demand.
Add to this the fact that 79 million baby boomers will retire in the next 20 years. That is about 10,000 a day for two decades. The challenges posed by their exodus from the workforce are not confined to a decline in numbers, but in education and skill levels as well.
You talk in the book about employers' reluctance to invest in necessary skills training. How can HR help overcome senior managers' objections to training?
A frequent objection is that if you train employees, they will be poached. However, exit interview research finds that, more often, lack of training and workplace mentoring drives them away. This is particularly true among the young and skilled. Training can improve younger worker's loyalty if it is clearly linked to a future career path. If not, they will take their skills and education to another company that better maps out their potential for the future.
Another objection is that training results can't be measured financially. Return-on-investment models provide contrary evidence. Our research has shown that training needs to be targeted to specific employee performance issues. There are many ROI methods now available to employers for in-depth quantitative evaluation of training/education programs.
But the biggest reason that businesses are not devoting the resources and time to make training effective is because training is classified as a cost. In 2013, the United States became one of the first adapters of a new international GDP accounting standard that will treat research and development as a capital investment rather than a cost. In a similar manner, another low-cost way to encourage more employee education and training is to allow corporations to depreciate their investments in human capital just as they can depreciate (physical) capital investments. Allowing training investment to depreciate over a reasonable time frame would improve quarterly profits by spreading the direct costs of training and even the wage costs of training participants over multiple quarters. Smaller companies could be given tax credits for such investments.
Why have corporations, schools and governments been so slow to move on the jobs crisis?
Society has been in denial. Public opinion will only begin to shift as the majority of people become directly caught up in this unfolding jobs revolution. But now we have reached an employment tipping point. The broad requirements of the U.S. job market can no longer be supplied simply by maintaining the current failing system.
U.S. businesses have overcome the skills deficit by importing skilled workers or outsourcing jobs. Why do you say these solutions will no longer work?
These talent safety valves are beginning to fail in part because this is also an international jobs-talent issue. The World Economic Forum predicts that this disconnect will persist for decades, and the worst global talent shortages are yet to come.
What does "Future Jobs" propose as a solution?
"Future Jobs" explores the concept behind Regional Talent Innovation Networks and their credibility as a major labor market change engine. RETAINs are community intermediaries. They act as hubs for cross-sector partnerships engaged in a systemic redesign that matches skills and jobs to regional economic development. RETAINs facilitate broader civic engagement by forging links between businesses, educators, community leaders and ordinary citizens.
How exactly do RETAINs work?
RETAINs break down the silos separating these and other segments of communities so they can unite to address problems that arise in times of regional crisis, including population and business flight, local economic stagnation and declining tax bases. Communities want to "retain" their life, viability and spirit to build a better, hopeful future. To do this, they must update their local talent, develop their capacity to innovate and also attract new businesses into a region.
RETAINs are reinventing a 21st-century education-to-employment talent-creation system that can support a tech-driven, knowledge-based economy. They are joint collaborations in community building. The key words here are "bottom-up collaboration," defined as joint authority, joint responsibility and joint accountability among all the partners.
No individual business or organization can rebuild a regional workforce by acting alone. The U.S. business culture has traditionally treated its involvement in schooling as a part-time charitable activity. Now, more and more local/national business leaders are beginning to see that workforce development is not charity, but that the very sustainability of their business and community are dependent upon it. RETAINs help refocus this dialog so that all of a region's partners consider becoming more interdependent. Even the largest corporations now are beginning to realize they cannot solve their talent shortages without participating in regional workforce systemic change.
Does your book describe successful RETAINs approaches?
Yes. There are about 1,000 RETAINs across the U.S. Some of the ones I write about are High School Inc. in Santa Ana, Calif., the New North in northeast Wisconsin, the Vermilion Advantage in Danville, Ill., and Partners for a Competitive Workforce in Cincinnati, Ohio. All are still works in progress, but they have sustained support through their initial stages and are making advances in transforming their education-to-employment systems.
RETAINs succeed because individual groups form a new shared vision of a larger community. Of course, transformation is never easy. Changing a region's employment and cultural outlook takes both time and perseverance. "Future Jobs" shows how civic activism can take many different, creative paths to achieve meaningful and sustained change.
Lynn Gresham is a former Senior Editor with EBN. Edward E. Gordon is the president of Imperial Consulting Corporation in Chicago. His previous books on workforce development include Winning the Global Talent Showdown, The 2010 Meltdown, Skill Wars and FutureWork.