Private Sector, Hate to Break it to You – But It's Up to You to Fix the Skill Gap

July 13, 2017

The only logical way for the skill gap to ever be crossed is through companies taking the lead.

In the Austrian village of Donawitz, there’s a steel plant. In the 1960s, that plant used to employ about a thousand people to make 500,000 tons of steel annually.

The steel plant is still there and it still produces 500,000 tons of steel annually. But do you know how many people it employs today?

Fourteen. A Bloomberg article describes the plant as a virtual ghost town, where machines quietly and efficiently do the work hundreds of humans used to do.

Jump to Long Island City, New York; headquarters of JetBlue Airlines. You would think there’s not a job out there that requires more training than a pilot, aside from maybe a medical doctor. And yet, due to an increasingly shrinking talent pool, JetBlue is developing ones itself: they are taking people with zero flying experience and training them to become pilots.

Those two stories seem unrelated. But the two of them show both the cause and the solution to the largest problem facing the world economy.

Jobs aren’t disappearing, they’re changing, and people can’t keep up

There’s this false and insidious belief out there that automation is leading to the vast removal of millions of jobs. But the numbers tell a much different story.

Look at the United States. In April of 2017, 5.5 million people were hired, according to the Department of Labor. Meanwhile, there were more than 6 million open positions left unfilled.

If those 6 million jobs were filled, the American unemployment rate would be less than 1 percent – the lowest in recorded history. So it isn’t as if the jobs don’t exist, it’s that there aren’t enough people in the world to do the jobs that are available.

This is where the steel plant story and the JetBlue come together. What’s happening is that certain jobs are going away, whereas new types of jobs are being formed, and people can’t keep up.

Specifically, jobs like the ones in the Austrian steel plant are being automated. Those are low-skill, non-customer-facing jobs that require people doing the same task over and over again. That’s a prime recipe for automation.

Conversely, airline pilot jobs are increasing. After all, flying is the lifeblood of the experiential economy as more people are flying than ever before. And yet, there is a shortage of pilots – a high skill job that requires critical thinking and fast decision-making – able to accommodate that need.

That’s the trend – low-skill jobs going away, high-skill jobs going unfilled.

Shouldn’t the government fix this problem?

There was a 60 Minutes episode into this exact issue. In the episode, reporter Bryon Pitts asked a businessman in desperate need of more high-skilled manufacturing workers an insightful question.

“I would imagine, if you had a parts gap, you’d close it right away,” Pitts said. The businessman agreed. “Then why can’t that occur with the skill gap?”

The businessman said he was doing what he could but there still remained a gap. Another businessman, when asked the same question, said he can’t afford to develop every employee and that training employees is not his “core competency.”

“We are not a school, we’re a company,” the man added. “We can’t do that well.”

There’s some truth to what he’s saying, particularly in his first point – it is expensive to train an employee from scratch. So, many companies are looking to the public sector to fix the problem.

And the public sector is trying. Most recently, President Donald Trump signed an executive order to create five million apprenticeships, which seeks to address this exact issue.

“Apprenticeships place students into great jobs without the crippling debt of traditional four-year college degrees,” Trump said when signing the bill. “Instead, apprentices earn while they learn.”

But here’s the reality: change from the government is a slow, onerous process that often results in a solution most people aren’t happy with. If the private sector is hoping the public sector will solve this problem… well, they are going to be sorely disappointed. 

Instead, it falls on the shoulders of business to overcome the skill gap, as they can be far more agile and solve it far faster.

Why business should fix this problem

Businesses fixing the skill gap would require investment from them. Yes, there are clear societal benefits, but companies are ultimately dependent on their balance sheets. What’s the business benefit to doing it?

Well, this is where the JetBlue story comes in. JetBlue isn’t training pilots from scratch for the benefit it’ll have on society. They are doing it because they believe it's the right business decision.

And that’s going to become increasingly true for more and more businesses. There are several benefits to building a robust training program at your company. They include:

  • A larger talent pool: The most obvious reason for building a robust training program – no more skill gap! No longer will you have to compete relentlessly with fellow organizations for the select few professionals who have the skills you need. Instead, you can drastically widen your net and find qualified applicants far easier. That should reduce time-to-hire and cost-per-hire.
  • A more engaged workforce with less turnover: The biggest reason people join or leave a job is for career opportunity (or lack thereof). Also, a dead-end job is one of the leading causes of disengagement. By providing a robust training program at your company, you provide clear career opportunity to your employees as they build up their skillset. This will lead to people who stay longer and work harder.
  • A more diverse workforce: How many companies – particularly tech companies – are working to build a more diverse workforce, to no avail? That’s because some applicant pools tend to lack diversity, as white men have a disproportionate amount of college degrees and experience in highly desirably fields. By building a robust training program you open yourself up to much more diverse applicant pool. Not only is this a good thing to do, essentially every study into the matter shows diverse teams outperform homogenous ones.

Not mentioned here – if more people had access to more jobs, it would pump up the world economy, which would improve the economic outlook for virtually every company. 

So, yes, it'll cost your company some money to build a robust training program. In return, you'll get a larger supply of more willing, engaged workers, with some positive PR to boot – seems like a worthy investment.

The takeaway

This feels like a public sector problem. For centuries, the educational system in most countries more-or-less worked, and people who earned a credential could generally get a job.

That’s just not the case anymore. Most people still don’t have college degrees, others have college degrees in majors that are not in-demand and others still have degrees in fields that are in-demand, but what they learned is no longer relevant. That’s leaving too many people on the sidelines and too many jobs left unfilled.

It’s time for the private sector to stop passing the buck to governments that are incapable of solving the problem. To fix the skill gap, companies are going to have to increasingly invest in learning to fill those jobs and ensure their existing employees keep the learning the skills they need.

It isn’t just the right thing to do. It’s also the most practical way to compete in the future.

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