A Skills Shortage Or Unrealistic Expectations?

If you missed the recent radio debate between Peter Cappelli and Cheryl Oldham (Minnesota Public Radio's MidMorning Show with Kerri Miller) you missed a mind-expanding 45 minutes! The challenging subject: The job market. Is there really a skills shortage or do companies have unrealistic expectations? Why aren't they getting the employees they need? The two experts offered their opinions, and several callers added theirs.

Cappelli, as you may remember, is director of the Center for Human Resources at The Wharton School and professor of education at the University of Pennsylvania. Oldham is with the Institute for a Competitive Workforce, part of the U.S. Chamber.

They both agree that companies can't seem to find the employees they're looking for. But with 13.9 million unemployed, why not?

Here's where they part ways. Oldham says it absolutely is a skills gap; potential employees just aren't qualified for the job (and one employer who called in added an exclamation mark to that argument when she said they've interviewed people who had no grasp of even basic grammar).

Cappelli says it's the companies themselves that are the culprits -- the source of the problem. In almost no cases are they looking for people right out of school who need training -- the affordable candidates. Instead they're looking for candidates with three to five years of specific job experience -- the unaffordable ones.

He first said it publicly in the Wall Street Journal in October, where he wrote,

With an abundance of workers to choose from, employers are demanding more of job candidates than ever before. They want prospective workers to be able to fill a role right away, without any training or ramp-up time. In other words, to get a job, you have to have that job already. It's a Catch-22 situation for workers--and it's hurting companies and the economy.

Employers, he says, need to stop blaming the education system for the worker shortage, start hiring, and spend more money on training.

While Oldham countered that ASTD says employers are spending between $60 and $100 billion annually on training, Cappelli argued with that statement. The Bureau of Labor Statistics, he said, suggests the average employee gets about five hours of training every two years. Apprenticeship programs have almost completely disappeared, and while potential managers used to get about 18 months of management training, that's a thing of the past, almost completely gone now. Yes, companies that see employees as an asset and want to keep them are more likely to offer training, but their numbers have dropped drastically.

Obviously one reason is that training can be expensive, and it also takes time. But the payoff for that investment is crystal clear. One caller, an economist who conducted a study of manufacturers, found that among firms that did some kind of training the turnover rate was so much lower that the savings more than covered the cost of the training. Another caller agreed, saying "the more I train my employees, the more productive and loyal they become."

Are colleges preparing would-be employees well enough? Yes, says Cappelli, "We're in the habit of bashing the education system, but the dropout rate has fallen by half since 1980, and 70 percent of high school graduates go immediately to college. The colleges are doing a fine job -- the most popular major now is business and people coming out can do entry level jobs."

But that's not who employers are looking for. They want people who have work experience, but for the most part, they can't afford to pay the wages experienced people want. So it's not a skills shortage, concludes Cappelli. A shortage means even at the market rate you can't find the skills -- they're just not available. Today the skills are available but companies are saying they just can't afford to pay to get them. A caller agreed, saying "The education system is putting out good people. We find there are a lot of talented people looking for jobs, lots of people with the right skills. We pay market rates and have no trouble finding them."

Blaming the problem on the workforce is wrong, says Cappelli. "If employers are willing to pay competitive wages -- and invest in training -- there are workers out there."

We took these suggestions away from the broadcast:

  • Reinvent the apprentice. Pay less while employees are being trained and more when their training is completed.
  • Create links with schools that allow employees to work during the day and learn in the evening.
  • Automatic interviews are necessary when you're screening thousands of candidates, but watch out for electronic screening programs that do way too thorough a job. We learned about one system that had 25,000 applications and yielded zero qualified applicants, obviously in serious need of redesign. Another demanded that applicants put in their salary expectations and screened out most highly-skilled applicants because their expectations were too high, leading managers to complain about the skills of the remaining applicants. So don't ask quite so many questions.
  • An employer who called in mentioned that benchmarking through employer associations helped him find out what the market is paying, and allowed him to set salaries that give him good results and success in recruiting talented people.
  • And finally, don't negate the selling power of workplace flexibility. Said one young woman caller, "Not all of us are drawn only by the salaries. Many of us would take a pay cut in exchange for flexible work hours."

And if you want managers and staff who can manage flexibility, train them with our online training.

E-mail me at Susan@wfcresources.com to learn more.

To get the October 24th article by Peter Cappelli, google Why companies aren't getting the employees they need. The November 29th broadcast may still be available here.