Employers across industries and regions have complained for years about a lack of skilled workers, and their complaints are borne out in U.S. employment data. In July, the number of job postings reached its highest level ever, at 5.8 million, and the unemployment rate was comfortably below the post-World War II average. But, at the same time, over 17 million Americans are either unemployed, not working but interested in finding work, or doing part-time work but aspiring to full-time work.
What underlies that mismatch? Why is the marketplace for skills so inefficient? While those questions came up repeatedly at a recent gathering at Harvard Business School of several CEOs, mayors, governors, university presidents, and organized-labor and policy experts, no consensus emerged as to what’s causing a shortage of skilled workers. The fault appears to be diffused: Employers expect qualified workers to be available on demand, most educators have only a vague understanding of the job market, and policymakers propose merely incremental improvements to a system that is wholly outdated.
A number of factors explain the current system’s perennial underperformance. For one thing, its various constituents hold different views of its effectiveness. For example, a recent survey of college and university chief academic officers revealed that 96 percent believed that their institutions prepared students effectively for the workforce; in a separate poll only 33 percent of business leaders agreed with that judgment.
That difference in perspective is unsurprising considering how poor the line of communication is between the worlds of business and education. Educators lack incentives to interact regularly with employers because of the metrics that are used to evaluate post-secondary education. They emphasize enrollment levels and graduation rates, rather than employment in field of study or the average time to graduation. A recent survey of community-college graduates in California found that only 36 percent held a job directly related to their field of study—and that they earned more than contemporaries in jobs unrelated to their majors. Nor is a four-year college degree a guarantor of good prospects. A Federal Reserve Bank of New York analysis indicated that about 45 percent of recent college graduates are “underemployed,” holding jobs that typically do not require a bachelor’s degree.
And, on the other side of the equation, employers are doing little to bridge a skills gap they decry as a threat to their competitiveness. In a survey of Harvard Business School alumni, roughly 25 percent indicated their employers had an active recruiting relationship with local educational institutions. Other avenues for cultivating sources of talent are also waning. Apprenticeship programs, for example, have declined by 40 percent between 2003 and 2013.
Companies no longer seem to view themselves as responsible for addressing their own need for skilled workers; if anything, they appear to be resigned about remedying the situation, as an increasing number of companies view hiring a full-time employee as a solution of last resort. When surveyed, the Harvard alumni group indicated a preference for investing in new technologies or outsourcing rather than hiring or retaining employees in growing their businesses by a margin of roughly two to one.
Policymakers, too, express frustration over the social consequences of our job system’s inefficiencies, but many of them put forward solutions to improve, rather than reform, today’s highly ineffective arrangements. For example, President Obama’s proposal to make two years of community college free implies that tuition is the principal barrier to matriculation, when the biggest barriers to degree completion are living expenses, transportation costs, and a lack of counseling and guidance. The inability of graduates to pay their student loans is often a function of the lack of professional relevance of the credentials students obtain. Policy initiatives often seek to achieve specific, transient goals—such as raising the employment prospects for minority youth in the technology sector, as reflected in the Obama Administration’s TechHire Initiative—rather than addressing structural factors.
Instead of working at cross purposes, each group—businesses, educators, and policymakers—can help build a better system if they collaborate and bolster each other’s efforts. Businesses’ competitiveness hinges on the ability to attract and retain motivated workers, so they should recognize that the current system’s deficiencies will only be overcome if they accept leadership of the system. Companies should extend the same exacting management principles they apply to their own supply chains to their talent pipelines. The price of investing heavily in this cultivation is justified if companies compare it to the true costs of a persistent skills gap.
Educators should be evaluated on a broader set of metrics, including those related to employability, such as whether their graduates are employed in their area of study. Community colleges in particular should develop relationships with local employers, both to cultivate opportunities for job placement and to test the relevance of their curricula. More attention must also be dedicated to programs for bolstering the soft skills aspiring workers must have to put credentials earned in the classroom to work. There are many virtues to a college education, but when it comes specifically to closing the skills gap, a four-year degree is by no means the only solution to preparing young Americans to be ready for the workforce.
Lastly, policymakers should seek to facilitate this new relationship between employers and educators. What would that require? The marketplace for skills suffers from the absence of relevant data, so providing comprehensive data on job placements would help educators allocate their resources effectively. The government can also encourage employers to cooperate in developing common definitions of credentials and provide incentives for all involved to work more closely to implement apprenticeship programs. And politicians should replace the common rallying cry of “college for all” with a more realistic goal of “post-secondary education for all.” Only one-third of Americans will graduate from an institution that grants four-year degrees. Celebrating post-secondary credentials will further legitimize the type of employment-oriented education that provides a path to economic prosperity.
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