America / Education / Labor Force

How To Fix the Skills Gap

In my previous blog, I discussed different ways to measure the skills gap. Main findings reveal that middle-skills jobs compromise the largest gap followed by high-skills jobs, and that soft-skills gap exists across the skill levels. Suppose we are able to find a consistent and quantifiable measurement to prove this. The next step would be to find solutions to fix it. Proponents of the skills gap argument suggest that government, private industry, educational institutions, and workers all share responsibility and should proactively collaborate to address the problem. Private industries are responsible for recruiting qualified applicants and training employees; educational institutions should develop and update curriculum that is relevant and valuable to employers; government should help the public access the right education and help employers by assisting their training efforts through ways such as funding; and finally workers should put their best effort to take full advantage of the public and private skills development opportunities to enhance their skills. I will discuss several possible ways these four actors can collaborate.

First, firms should provide more on-the-job skills training through apprenticeships programs, which have been on the decline in recent years mainly due to weakening of labor unions that run the program. Yet, it is important to note that simply expanding the number of apprenticeship programs will not solve the problem. According to Burning Glass Technologies, today’s employers expect interns to arrive at work with specific skills already in hand and view that the purpose of internships are to mainly offer experience, not training. This perception should change. Apprenticeship and internship programs should be designed to actually train technical and behavioral skillsets that are firm-specific, and create incentives for workers to diligently adopt necessary skills and build greater productivity by enabling them to see a career path after the program. Another concern regarding these programs is that many firms, especially in industries where competition is fierce, are not incentivized to run such programs because they worry that other companies will poach their workers after training. Government intervention can help address this concern by making training cost affordable (this point will be elaborated later) and ensuring a level-playing field in the labor market so that firms will not worry about losing workers from competitors that pay an unfairly higher wage. Betsey Stevenson from the University of Michigan commented from a macroeconomic point of view upon hearing that workers quitting jobs: “counterintuitively, is actually a great thing when [they] feel confident enough to leave their jobs to seek out better opportunities.”

Secondly, the educational system should expand the role of community and technical colleges to respond to a misconception among low and middle-class workers that obtaining a bachelor’s degree is the only path to career success. The BLS reports that 80% of growing occupations through 2014 do not require a bachelor’s degree. However, employers prefer a bachelor’s degree over an associate’s degree as a rough screening system to recruit better workers in middle-skills roles. Middle-skills industries such as healthcare and manufacturing require specialized technical and mechanical skills. Consequently, community college representatives believe that technical credentials, on-the-job training, and apprenticeship programs are more practical options for students who desire to get such jobs. Through research, Diana Furchgott-Roth from the Manhattan Institute found that C-average students have better employment outcomes with higher earnings when they attended community colleges instead of 4-year colleges. Furthermore, these schools, by combining classroom learning with on-the-job experience, are reshaping the traditional notion that the education and employment pipelines are not sequential anymore. For example, Honda Motor Company is partnering with state representatives and local community colleges to provide students with access to technical training through paid internship or work-study partnerships, which allow students to work at Honda 3 days per week and attend school 2 days per week. Raising awareness of successful employment outcomes from community college degrees would encourage more employers to initiate partnerships with the schools and encourage more students to attend these schools for a viable career path.

Thirdly, several federally funded public workforce programs (including demonstration and pilots) have been carried out across states to provide an affordable way for employers to provide educational benefits as well as to help employees save money to improve their skills. Individual Training Accounts (ITA) introduced under the Workforce Investment Act provide training vouchers to workers through public funding to procure the training program of their choice among the state’s list of eligible providers. Lifelong Learning Account (LiLA) is an employer-matched, portable education account (like a 401(k) plan) owned by employees to finance their education and training over their lifetime. The US government encourages partnerships between employees and employers by providing tax credit to both. The LiLA program not only sets a good example of engaging joint effort amongst firms, workers, and government to address the skills gap, but also supports the notion that education and employment are not sequential. Education does not stop once associates are hired. Workers should constantly upgrade their skills through lifelong learning in today’s fast-paced, ever-changing economy.

Furthermore, welfare and labor policies can be designed in ways to increase worker rate and help existing qualified workers stay attached to the labor force. Some conservative policy workers view that government should impose stronger work requirements such as training, work search, or community service in exchange for receiving basic welfare benefits including housing, food stamps, and Medicaid. This is a controversial point, but proponents of the idea argue that there are several benefits of doing so. These policies would: 1) engage the grantees to prepare to join the workforce, 2) improve workers’ health status as they are more likely to get health insurance under employers, 3) cut the poverty rate as grantees will have additional earnings in addition to the benefits, and 4) “play in a value of American sense of reciprocal responsibility”[1]. On the other hand, family support such as paid family leave, neutralizing paid leave policy, and childcare programs can help parents, especially women, stay in the labor force. This not only enables workers to continue on their career path and increase their wages, but also helps employers take advantage of a skilled workforce and alleviates their concern of finding qualified workers.

Lastly, workers themselves can be proactive in keeping up with the changing demand of industries and make informed choices about their learning plans, which can be aided by career advising. Workers should put their best effort to obtain the skillsets required for their desired job. Demand for careers is constantly evolving. Automation is reducing the demand for less-skilled workers and Artificial Intelligence will likely replace existing tasks and will create new kinds of jobs. The E-commerce revolution offers a new set of capabilities such as “advanced distribution” in high-tech warehouses, causing brick-and-mortar retail jobs to decline. Recent manufacturing and health care industries have incorporated computer-driven technologies, and they now demand digital skills. Many new jobs are hybrids, requiring skill sets from different disciplines. For example, clinical analysts need the skills of a registered nurse and an IT technician. These two skills are rarely trained together; education and training providers should develop more opportunities for students to cross-train between the two skillsets that are not typically taught as a package. New demands can be burdensome for students and parents who are mindful of education costs. Minors or concentrations during college, boot camps, online courses, or short-term training programs are viable solutions for educated workers to hone their existing knowledge and build upon adaptable and workable skills.

To conclude, because technological innovation continues to bring new machines and replace existing tasks, the labor market system suffers the perennial fate of facing new labor demands, and the skills gap problem will not vanish. Thus, communication and collaboration between employers, workers, and education providers mediated by the government are essential to ensure that workers adapt to changing skillsets demanded by employers. Education should continue even after workers are hired, and lifelong learning should be encouraged.

[1] Commented by Wade Horn from Deloitte Consulting LLP at an AEI event: “Welfare policy and the Trump administration: What do conservatives think?

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