It's time to tackle the skills gap

From the pages of In Business magazine.

Before the October surprise of 204,000 new jobs, the U.S. economy created 163,000 jobs in September (revised upward from 148,000) and averaged 190,000 new jobs per month over the prior year. While October marked the 44th consecutive month of job growth, we’re creating jobs at such a moderate pace that it will take several more years to recover all the jobs lost in the Great Recession. Many elected officials don’t seem to have noticed, but there appears to be a structural transformation underway that must be addressed if employers expect to find the labor they need, not only to function but also to flourish.

Author Edward Gordon has not only noticed this transformation, he has written in-depth about it in Future Jobs: Solving the Employment and Skills Crisis. By now, the term “skills gap” has been tattooed on the brains of employers, and I plead guilty. I’ve been among those applying the tattoo, but I offer no apologies because the skills gap is real — and real concerning.

At the moment, about 11.3 million Americans are unemployed and millions more are underemployed. Gordon notes that some of the blame for employer hesitation can be pinned on the financial crisis of 2007-09; however, the main culprit is that we aren’t producing workers with the right skills to replace the 79 million baby boomers who will retire over the next 20 years.

This mismatch between individual skill and employer need is due to a structural change — from the computer age to what Gordon calls the “cyber mental age” — that leaves low-skill workers behind. Gordon says that to upgrade those skills, corporations should be allowed to depreciate their investments in human capital, just as they can depreciate physical capital investments, and spread the direct and the wage costs of training over several quarters. To further incentivize job training, he proposes that small businesses be eligible for income tax credits for that purpose, and he espouses reforming our rather archaic education-to-employment model to ease the transition from school to career.

Many regions are wisely not waiting for the politicians to wake up and smell the coffee. Gordon cites the emergence of Regional Talent Innovation Networks, or RETAINS, including the New North organization in Wisconsin, that have been organized to address population, workforce, and business erosion. They are some differences between them, but a common feature is business investment in education, worker training, and apprenticeship training. “They are not meant to replace the components of the education-to-employment system, but to get them to work better,” Gordon says. “That is what they have been doing.”

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Whether you’re a student of the Keynesian school or a devotee of Milton’s Friedman’s free-market economics, the solution cannot be found in macroeconomics but in workforce development. “The issue is systemic and structural,” Gordon says. “It will not be solved through monetary or fiscal policy. The issue is that the education-to-employment system is out of date.”

I’ll add three more to Gordon’s list. The skills gap is also a reason to pass immigration reform, expand the number of H-1B visas (we’re facing a global talent shortage, so we’ll have to compete harder for foreign talent), and convince more girls and women to pursue STEM careers. But even with all that, the business organizations that do the best job filling their share of the nation’s estimated 7.1 million vacant jobs, and replace those retiring baby boomers, will be the ones that do the best job of workforce development and training.

To Gordon, the stakes are critical for both business and society, and we’re running out of time. “We are falling off a talent cliff,” he stated. “If we don’t do something by 2020, we will have serious social unrest in our country as more middle-class people are pushed into the lower classes, where they won’t have what they have today.”

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