Debunking the 'skills gap' myth
Journalists visit the Huawei Digital Transformation Showcase in Shenzhen, China's Guangdong province on March 6, 2019. Source: AFP/Wang Zhao

What happens when you get a university degree but then you’re told “it’s not what employers want”?

That’s the predicament for scores of university graduates today. Recruiters call it the “skills gap” – two words that mean workers lack the technical skill companies need in this age of information technology. It’s a “mismatch” of talent supply and demand, with blame mostly on the supply side ie. workers and graduates.

And it’s not just a gap, but a chasm, according to human resources consulting firm, The Manpower Group. Forty-five percent of 42,000 employers surveyed for the 2018 report said they were having trouble filling roles. An Open University report last year found that 97 percent of organisations working in STEM and 96 percent of financial organisations have had difficulty hiring skilled employees over the last 12-months. Sourcing talent with the right skills is proving to be the biggest problem companies are facing today.

But how true is this?

Employees working at a battery factory in Huaibei in China’s eastern Anhui province. Source: AFP/STR

Not at all, if we look at data. Andrew Weaver, Assistant Professor in the School of Labor and Employment Relations at the University of Illinois at Urbana-Champaign, conducted a series of nationally representative skill surveys covering a range of technical occupations. He looked into manufacturing production workers, IT help-desk technicians, and laboratory technologists. He asked hiring managers in this sector: what skills do employers demand, and do the employers that demand high skill levels have trouble hiring workers?

Firstly, he found that less than a quarter of manufacturing plants had one or more production-­worker vacancies that had lasted three months or more. The industry then claimed three-quarters or more faced trouble hiring skilled workers.

Secondly, only 15 percent of IT had prolonged unfilled vacancies. And the reason for this was because they were concentrated in the overnight shift. It was less about the lack of skills than it was about companies not offering adequate compensation for such difficult working conditions.

Only 15 percent of IT help desks report extended vacancies for technician positions. While the results show higher levels of long-term lab-tech openings, it turns out that many of these are concentrated in the overnight shift and thus reflect inadequate compensation for difficult working conditions, not a structural skill deficiency. A little over a quarter of clinical diagnostic labs report at least one long-term vacancy.

The results yield a number of surprises. Firstly, persistent hiring problems are less widespread than many pundits and industry representatives claim. A few years back, Paul Osterman of MIT’s Sloan School of Management found that less than a quarter of manufacturing plants had one or more production-­worker vacancies that had lasted for three months or more. By contrast, industry claims at the time were that three-­quarters or more faced a persistent inability to hire skilled workers.

In clinical diagnostic labs, only a little over a quarter report at least one long-term vacancy.

“The survey results do show some hiring challenges, but not for the reasons posited by the conventional skill-gap narrative. In fact, the data reveal that high-tech and cutting-edge establishments do not have greater hiring difficulties than other establishments,” Weaver wrote in MIT Technology Review.

“In fact, the data reveal that high-tech and cutting-edge establishments do not have greater hiring difficulties than other establishments”. Source: AFP/Wang Zhao

Yet, the “skills gap” myth is a compelling narrative analysts, politicians and pundits push. For companies, it’s easy to frame the problem as one of low-quality labour supply, blaming students and schools.

It’s harder for companies to take on initiatives, like working with technical colleges or other institutions, or offering employer-provided training, as Weaver suggested. Only half of American manufacturing plants provide formal training to production workers and only 52 percent of IT help desks have relationships with institutions from which they hire workers or receive training services. Clinical labs also lack a local training institution.

A paper at the at the American Economics Association’s annual conference concurs with this. During the Great Recession, when unemployment was high, employers responded by making their job descriptions more stringent. As unemployment grew, so did the education and experience qualifications employers were looking for. When the rate went down, so did their requirements.

“Our results imply that the increase in unemployed workers during the Great Recession can account for 18 to 25 percent of the increase in skill requirements between 2007 and 2010,” the paper’s abstract wrote.

As Vox explains: “In other words, the skills gap was the consequence of high unemployment rather than its cause. With workers plentiful, employers got choosier. Rather than investing in training workers, they demanded lots of experience and educational credentials.

“And while job skills are obviously important, when the labor market is healthy employers have incentives to try to impart skills to workers rather than posting advertorial content about how the government should fix this problem for them.”

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