(Credit: American River College)
In the last year or so, we’ve been hearing a lot about the skills gap. With millions of people looking for work and millions more “discouraged” and sitting on the sidelines, employers have posted record numbers of open jobs. If only these job seekers had the skills needed by employers, goes the argument, we could dramatically reduce unemployment and address the needs of employers — an opportunity to fashion a real win-win for workers and employers alike.
Not so fast, say some labor market economists. They argue that a real skills gap should result in increased wages offered by employers and there’s little indication of that. Maybe employers aren’t really interested in filling all those open jobs, and certainly not if they have to spend more money.
Who’s right? There are problems with both arguments. A simple exercise of counting job openings without looking at the nature of those job openings is bound to at least partly miss the mark. And the labor economists seem to be advancing a very simple model of the labor market – one that doesn’t recognize that employers have many other options to deal with hiring challenges than simply offering more money. They can outsource jobs, re-engineer work, and use temporary and part-time labor patching strategies, among other strategies.
As we come out of the recession, however, there is growing clarity that 1) employers are increasingly challenged to find the right talent to maintain their competitiveness and 2) workers without the right skills and education are consigned to lower wages and higher rates of unemployment.
At Skills for America’s Future, we’ve conducted or reviewed dozens of employer surveys, and overwhelmingly these studies confirm that employers are struggling to find workers with the skills needed to compete. This is especially true in California, where 65 percent of jobs are projected to require at least some post-secondary education by 2020. Given current completion rates, the state is facing a deficit of nearly 2 million workers, with approximately half of these falling into the middle skills category: high value jobs in a number of industries that require technical or trade skills, certifications, or credentials, without requiring a bachelor’s degree.
What exactly are the skills employers need?
Employers consistently identify hiring challenges in four areas: workplace readiness; basic numeracy and literacy; technical skills; and a fourth, emerging area we’ll call “qualifications” or experience. It should come as no surprise that employers don’t want to hire someone who has no demonstrated ability for a technical job. Increasingly, companies ask for a portfolio of work experience, credentials, and/or experiential learning opportunities like internships, apprenticeships, or work-based learning. The problem is that there are simply not enough of these programs available to students to meet demand.
Economic factors in play
Our national unemployment rate continues to decline, reaching a low of 5.8 percent in November 2014, according to the Bureau of Labor Statistics. California’s rate, however, remains higher, at 7.2 percent. Still, as the unemployment declines, the need for new and higher skills is only going to become more challenging. We know from previous recoveries that, as the economy emerges from the recession, the pace of change for innovative technologies and processes means that the new jobs created often require new skills to accommodate evolving needs of employers.
Employers also tell us that an overall expansion of hiring is coming in 2015. Those who were already feeling the pain of a shortage of skilled workers are about to be even more impacted unless we take steps to understand their needs and train workers with those specific skills. This combination of hiring difficulties and changes in the labor market, combined with the shifting demand for new skills means concerted action is needed.
Successes in some states point to promising practices
Nowhere is the evidence of action more apparent than Texas, which has one of the lowest reported unemployment rate in the nation in November – at 4.9 percent. Legislation in the form of House Bill 5 (H.B.5) focuses on the K-12 system as an object of reform and higher levels of impact, but it also engages colleges and employers in partnerships. H.B.5 ensures high school students are both prepared for college and exposed to career exploration opportunities in the form of internships or work experience days to better prepare them for the future. Texas employers have mobilized around this initiative, recognizing that aligning systems in different ways can put career exploration on par with preparedness for higher education, creating a rising tide in the workforce.
Another powerful way to drive these types of changes is through alternative funding streams. Louisiana passed a funding provision in 2014 that provides a four-to-one match for any employer investment in higher education. This solution leverages the employer’s commitment and builds the capacity of higher education to expand successful programs and grow the pipeline for the industry. In New York, the state made modest funding available to community colleges that met benchmarks for job placements, industry engagement, and hiring wage levels. This funding, in the form of incentive awards, motivated colleges to focus on deepening and strengthening employer partnerships beyond basic solutions for a total cost of around $4 million.
The way ahead for California
The size of the California Community Colleges system gives it a unique responsibility to hone in on practices that work regionally to solve skills mismatches in the labor market. Cookie cutter solutions won’t work across the state; real change will require taking the best of what is working in one region and applying it in a similar way elsewhere. The increasing challenge for both workforce development and education is that they must think about designing credentials and education opportunities in ways that help students demonstrate not just knowledge but ability through apprenticeships, capstone projects, and experiential learning. All of these opportunities are advanced when educators are working with employers. Finding what works is a balance of structure and governance that promotes better opportunities for employers to engage.
The California Community Colleges’ recently commissioned Board of Governors Task Force on Workforce, Job Creation, and Strong Economy is a good example of a structure that can create real conversations for change. Vice Chair of the Aspen Institute’s Skills for America’s Future Advisory Board Eva Sage-Gavin has said, “Stronger alignment between employers and educational providers is critical to creating opportunities for students and building a pipeline of qualified workers for employers. Community colleges and other technical education providers have an imperative not only to create the bridge between these two groups, but also to help them walk across that bridge.”
On Thursday, January 22, the Task Force meeting will open with a more detailed discussion of the skills employers need in California and how employers, education, economic and workforce development organizations, and policymakers can work together to build a stronger workforce for California. Bringing these groups together to open this valuable conversation is an important step in forging the way ahead for California’s economic success.
John Colborn is the Director of Skills for America’s Future, an employer-led workforce development initiative of the Aspen Institute. He will deliver opening remarks at the California Community Colleges Strong Workforce Task Force meeting on Thursday, January 22, 2015. In 2015, Skills for America’s Future will conduct an in-depth study of ‘what works’ via state-by-state analysis of policy levers that help promote partnership between community colleges and employers.