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WHITE PAPER: The Skills Gap: The Growing Demand for Niche Skills High Tech

 The Skills Gap is real?
image53The Manpower Group, a human resources consultancy, conducts a worldwide “Talent Shortage Survey” but the idea of a “skills gap” as identified in this and other surveys has been widely criticized. Peter Cappelli asks whether these studies are just a sign of “employer whining;” Paul Krugman calls the skills gap a “zombie idea” that “that should have been killed by evidence, but refuses to die.” The New York Times asserts that it is “mostly a corporate fiction, based in part on self-interest and a misreading of government data.” According to the Times, the survey responses are an effort by executives to get “the government to take on more of the costs of training workers.”
According to Kelly Services research, the simpler explanation is the better one: many employers might actually have difficulty hiring skilled workers. The issue is confusing because the skills required to work with new technologies are hard to measure. They are even harder to manage. Understanding this controversy sheds some light on what employers and government need to do to deal with a very real problem.
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Industry analysts say the high tech job market is improving, the hiring process has sped up, and salaries are on the rise. However, the market is complex and workforce requirements within the high tech industry fluctuate regularly.

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Although there is plenty of skilled talent for lower-end IT jobs, newer technologies—including cloud computing, mobility, data analytics, social media, medical devices, and consumer digital products—are causing companies to seek out engineers with specific expertise. And as companies turn to automation and machines to increase productivity, the demand is rising for people with niche skills and specific technical knowledge.

Employers are finding innovative and competitive ways to look for the talent they need. Some large firms work with analytics groups that monitor social media, job postings, and online résumés to find out what is happening in specific labor markets where certain skills are in demand, and the growing popularity of telecommunication and video conferencing. Companies are also opening their workforces up to models and talent types they may not have considered in the past such as outsourcing solutions, contractors, and temporary staffing.

Peter Cappelli reviews the evidence to conclude that there are not major shortages of workers with basic reading and math skills or of workers with engineering and technical training; if anything, too many workers may be over-educated. Nevertheless, employers still have real difficulties hiring workers with the skills to deal with new technologies.

Why are skills sometimes hard to measure and to manage?

Because new technologies frequently require specific new skills that schools don’t teach and that labor markets don’t supply.  Workers will more likely invest when standardized skills promise them a secure career path with reliably good wages in the future.

Under these conditions, employers do, have a hard time finding workers with the latest design skills. When new technologies come into play, simple textbook notions about skills can be misleading for both managers and economists.

Some economists argue that there is no shortage of employees with the basic skills in reading, writing and math to meet the requirements of today’s jobs. But those aren’t the skills in short supply.

Other critics look at wages for evidence. Times editors tell us “If a business really needed workers, it would pay up.” Gary Burtless at the Brookings Institution puts it more bluntly: “Unless managers have forgotten everything they learned in Econ 101, they should recognize that one way to fill a vacancy is to offer qualified job seekers a compelling reason to take the job” by offering better pay or benefits. Since Burtless finds that the median wage is not increasing, he concludes that there is no shortage of skilled workers.

Technology doesn’t make all workers’ skills more valuable; some skills become valuable, but others go obsolete. Some specific occupations such as nursing do show sustained wage growth and employment growth over a couple decades. And there is more general evidence of rising pay for skills within many occupations. Because many new skills are learned on the job, not all workers within an occupation acquire them.

This trend is more general. We see it in the high pay that software developers in Silicon Valley receive for their specialized skills. Research shows that since the 1980s, the wages of the top 10% of workers has risen sharply relative to the median wage earner after controlling for observable characteristics such as education and experience. Some workers have indeed benefited from skills that are apparently in short supply; it’s just that these skills are not captured by the crude statistical categories that economists have at hand.

And these skills appear to be related to new technology, in particular, to information technologies. The chart shows how the wages of the 90th percentile increased relative to the wages of the 50th percentile in different groups of occupations. Millions of workers within these occupations appear to have valuable specialized skills that are in short supply and have seen their wages grow dramatically.

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This evidence shows that we should not be too quick to discard employer claims about hiring skilled talent. The evidence highlights instead just how difficult it is to measure worker skills, especially those relating to new technology.

What is hard to measure is often hard to manage.

Employers using new technologies need to base hiring decisions not just on education, but also on the non-cognitive skills that allow some people to excel at learning on the job; they need to design pay structures to retain workers who do learn, yet not to encumber employee mobility and knowledge sharing, which are often key to informal learning; and they need to design business models that enable workers to learn effectively on the job (see this example). Policy makers also need to think differently about skills, encouraging, for example, industry certification programs for new skills and partnerships between community colleges and local employers.

Although it is difficult for workers and employers to develop these new skills, this difficulty creates opportunity. Those workers who acquire the latest skills earn good pay; those employers who hire the right workers and train them well can realize the competitive advantages that come with new technologies.

 

Excerpts from a blog  that first appeared on Harvard Business Review 
James Bessen, an economist at Boston University School of Law, and an expert on technology and jobs. Full Bio | More from James Bessen
The Conference Board, founded in 1916, is a global, independent business membership and research association that provides the world's leading organizations with the practical knowledge they need to improve their performance and better serve society.
About Kelly Services - Global:  Kelly specializes in providing world-leading staffing solutions. Backed by an international network of more than 2,600 offices in 39 countries, including 21 European countries,  is serving clients around the world by delivering a wide range of services, including recruiting, human resources management and placement for job-seekers. All offices, with more than 555,000 employees, apply the principles of Total Quality Management (TQM).

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