should we care about the low-wage sector skills gap?

skills-gap-in-the-us-luis-salazar

The hourly-jobs sector is the heart of the U.S. labor force with 76 million workers, and open positions are staying open for 30 days — longer than ever recorded in the 15-year history of the National Mean Vacancy Duration Index [1].

With over nine million workers looking for jobs, why is it taking longer than ever for employers to fill open positions? The popular explanation is that the American economy is currently suffering from a surplus of unskilled workers.

Half of U.S. employers experience difficulty filling “mission-critical” positions [2], and 61 percent claim they’ve hired someone who did not meet the job requirements [3]. In sectors such as manufacturing, the skills gap represents a loss of up to $14,000 per open position in revenue annually [4].

More than half of adults in the U.S. lack the literacy skills necessary to identify or interpret one or more pieces of information [5], a key element for success in work. And while extensive research exists on the skills gap affecting sectors such as engineering, manufacturing and technology, there is also a major gap in the low wage hourly sector.

Jobaline reports gaps on basic skills required to be a merchandiser, retail clerk, customer service rep, hotel housekeeper, delivery driver or fast food restaurant worker, among many others. Up to 35 percent of job seekers are missing one simple skill such as having a driver’s license, a security guard certification, a food handling permit, or knowledge on how to read a planogram, build rapport with a customer, or operate a specific piece of equipment. These gaps keep them from getting a job that represents, in some cases, a double-digit percentage increase in their hourly wage. In most cases, job seekers were not even aware of the need to have that skill, and instead spent time and money getting trained in skills that are not beneficial in the job market.

A shift might be needed to help individuals find the right path to the right job, recognizing that most jobs do not require a four-year degree.

How do we deliver the right training, be it four years, one year, one month, one week or one hour — to the right person? And how do we simultaneously inform potential employees that the job is out there and if necessary, show how to improve their skills based on what the employer wants when making the hire?

Many experts point to low wages as a root cause of the skills mismatch. This scenario is evident even in skilled industries where, although employers should pay more to attract and retain qualified workers, current market dynamics and consumer behavior demand the cheapest possible good or service, thus adding downward pressure to wages. This results in a lack of incentive, on the worker’s part, to invest in proper training.

Why pay to go to a technical school or even to a four-year college or university only to make marginally better wages?

A 2014 study by CareerBuilder found that 92 percent of employees become more loyal to a company that invests in training them. In the hourly sector, with attrition rates as high as 200 percent, even a marginal improvement in retention can have a meaningful financial impact on reducing the costs associated with a constant hiring cycle. This money can then be used to bump up wages for workers with the right skills.

The U.S. private sector has been addressing the need for skills training for some time, with companies such as Comcast launching their own learning institutes. Since 1999, they have offered over 4,000 training courses, delivering 4.7 million hours of training to their employees, with the majority of the resources spent on front-line hourly employees. In 2014, the average annual spending on training in companies with more than 10,000 employees in the retail and service sectors was over $19 million while companies with 1,000 to 9,999 employees invest $0.5 million to $1.6 million.

In 2015, over 40 percent of U.S. companies plan to invest in Learning Management Systems and online learning tools, and 23 percent in mobile learning. Many companies plan to increase their investment in worker training in 2015. In the retail sector, two of every three companies plan to increase spending, along with two of every five companies in the service sector. The key drivers behind this higher spending are the increase in the workforce (more people to be trained) and the acquisition of training technology [6].

Technology must continue to develop along with the trend for more worker training, as most content needs to be adapted to the mobile web and video format as a result of the changing behaviors of the current and next generation of hourly workers. Among millennials, who account for 35 percent of the total workforce, the penetration of smartphones is over 80 percent and growing.

Mobile technology can enable the private sector to address basic skill gaps in real time.

For employers, this can result in a better trained and more loyal workforce. For workers, it can represent an increase in income as they get exposed to continuous, relevant and up-to-date training and education — the specific training they need to move up one notch in their journeys.

Do we care enough about the sector and understand well enough the potential benefit for the U.S. economy if we address not only the high and mid-level skills gap, but also the lower/basic skills gap for hourly workers?

references:

  1. DHI-DFH Measure of National Mean Vacancy Duration April 2015 – http://dhihiringindicators.com/
  2. http://www.trainingmag.com/trgmag-article/bridging-skills-gap
  3. http://www.careerbuildercommunications.com/pdf/skills-gap-2014.pdf
  4. http://www.themanufacturinginstitute.org/~/media/827DBC76533942679A15EF7067A704CD.ashx
  5. Program for the International Assessment of Adult Competencies (PIAAC), 2012
  6. 2014 training industry report – Dec 2014 – training magazine, http://www.trainingmag.com