As the American economy enters its eighth year of post-recession growth, the unemployment rate continues to fall. In fact, May’s reported unemployment rate of 4.3% is the lowest in sixteen years, marking just how far we’ve come since a high-point of 10.0% in October 2009. Unfortunately, anecdotal evidence from workers and employers and a deeper dive into labor statistics indicate that, despite these improvements, structural issues remain. While concerns such as underemployment and reduced participation in the labor force remain problematic, perhaps the biggest issue for American jobseekers and businesses today is a growing gap between the skills companies seek and the abilities of the workforce. Known as the ‘skills gap,’ this asymmetry can have a damaging ripple effect that weighs on everything from individuals’ opportunities for employment to overall economic productivity.
There are a number of reasons for this growing skills gap, but the biggest and most direct cause seems to be the rapidly changing nature of technology. As companies adopt cutting-edge processes and technologies to boost their productivity, the nature of the skills they seek in applicants changes. Boston University economist James Bessen highlights this issue quite well using the graphic design industry as an example, explaining that “(u)ntil recently, almost all graphic designers designed for print. Then came the Internet and demand grew for web designers. Then came smartphones and demand grew for mobile designers. A few years ago they needed to know Flash; now they need to know HTML5 instead.” A multitude of industries are evolving in similar ways, and at similar speeds. As a result, employers are either forced to let jobs sit unfilled for longer or redirect more resources to on-the-job training. The impact on individual workers can be even more damaging. Skilled workers can now become unskilled relatively quickly, forcing them to retrain, change industries, or remain unemployed.
Other causes of the labor-business mismatch are harder to pinpoint. For example, some reasonably assume that increased college participation and graduation rates would help produce smarter labor force entrants and, in turn, reduce this gap. Others, such as economist Peter Cappelli, assert that persistent ‘over-education’ is actually part of the problem, creating a segment of young workers who are less trained in areas relevant to the modern economy. They argue that college curriculums do not adapt to industry changes quickly enough and that students often select majors ill-suited for employment opportunities.
While the solution to these issues remains unclear, politicians, economists, educators, and employers have all taken notice and are working to address the issue. One almost universally accepted idea revolves around increasing students’ exposure to computer science education at an early age. Another widely considered solution involves so-called public-private partnerships, in which the government and private industry work together. Areas of collaboration could include combined recruiting efforts to minimize job-worker mismatch, cost-sharing programs to further incentivize training and hiring, and even child care programs that would allow skilled parents to re-enter the workforce more comfortably. Other promising plans revolve around rejuvenating vocational and technical schools to make them a more viable alternative to high school and/ or college.
More ambitious and unconventional solutions have been proposed as well. Silicon Valley has emerged as a somewhat unlikely benefactor, taking a particular interest in cultivating coding and programming skills among young people, with high-powered individuals often leading the charge. Salesforce CEO Mark Benioff, for example, is investing millions of dollars into California’s middle schools in an effort to hire tech teachers, install Wi-Fi, develop comprehensive computer science curriculums, and more. Other giants of the tech industry have been brainstorming their own, even more ambitious, K-12 education reform efforts as well. Another revolutionary idea involves establishing a German-style apprenticeship system in the U.S. This approach would entail high school graduates applying directly to private companies for multi-year training contracts instead of applying to college. The companies would then design a training curriculum for the apprentices, with the trainees receiving industry-recognized qualifications upon completion. In the vast majority of cases, the companies immediately move to hire the students they have trained, as they can be uniquely confident that the apprentices have learned the appropriate skills that they will need on the job.
Unfortunately, none of these proposals will fill the skills gap overnight. As a result, it is likely that today’s skills gap will continue to weigh on an otherwise robust labor market for the foreseeable future.