Southern Miss Business November 2022 Newsletter

Skill Gap, Will Gap, or Both

As most of us know, competition for talent is fierce. Everywhere I turn, I hear employers are struggling to fill all their job openings. Regardless of industry and job type, the problem is pervasive. One explanation for this issue is a mismatch between the skills employers need and the available skills in the labor market. Many employers assert that the current workforce does not possess many of the needed skills. A U.S. Chamber of Commerce study reported that 74% of hiring managers believe there is a skill gap in the current labor market with 48% suggesting that applicants lack the skills needed to fill open jobs. The skill gap is multi-faceted; workers lack both interpersonal/soft skills and technical/hard skills. This is not a new phenomenon either but very little has been done to address it. Aside from being inconvenient, the labor shortage and skills gap is expensive, expected to equate to a total loss of $8.5 trillion by 2030 according to PwC. Outsourcing and AI can address some of these needs, but most of them will have to be addressed in other ways.

Another possible explanation for this problem is the low unemployment rates we have seen in recent years. However, the unemployment rate is a misleading statistic. A few years ago, we had historically low unemployment rates which were described as "full employment" while there were around 7 million Americans not working. That doesn't seem to jibe but you must understand how the unemployment rate is calculated. Who is not counted in the unemployment rate? Those individuals who are unemployed and have not looked for work in the past four weeks are not counted in the unemployment rate. In the U.S., the unemployment rate only takes into consideration those in the labor force, which are people that are working or not working but actively seeking work. Those who are not seeking work include working aged individuals who are retired or disabled, but it also includes a growing number of people who have opted out of the labor market for a variety of reasons. There are simply too many people who are not interested in employment. This has been an issue for decades, but the pandemic seems to have exacerbated the problem. The labor shortage is likely to get worse as Baby Boomers continue to retire in droves and we begin to see the results of decades of slowed U.S. population growth.

So, while there are significant skill gaps, there also appears to be a mismatch between the talent companies need and the number of workers willing to supply it. As a result, addressing this complex challenge will be difficult and require a multi-pronged approach. Traditional levers used to attract and retain employees shouldn't be abandoned but we must identify new ways to engage the large pool of potential employees who have shunned traditional employment in recent years. While total compensation is generally important to everyone, employers will need to find ways to appeal to desires for career development and advancement, meaningfulness of work, workplace flexibility, and a supportive workplace where concern for everyone's health and well-being is apparent. There is no magic bullet solution to these challenges and organizations will have to tailor their approaches to their unique values and culture. What are you and your organizations doing to address these challenges?