Not that long ago, an idea began to circulate that the U.S. economy was going to run out of workers. Consulting firms began pushing the idea, citing each others’reports as evidence. Reporters wrote about it. And a great many people in the private sector and the government swallowed the concept whole. By the mid-2000s, many big employers and even some government agencies were preparing for the Great Labor Shortage to set in by 2010.
While the idea seems preposterous now, something similarly absurd is happening again. Raise your hand if you’ve heard this: There are good jobs out there for people who have skills. But employers can’t find people to hire because high schools are failing and college students aren't majoring in the hard subjects where the jobs are. The economy, as they say, is facing a skills gap. (The latest jobs report, out Friday, shows the lowest hiring numbers in eight months.)
I’ve recently reviewed all the papers and stories on this question, and there is no more truth to this notion than there was to the labor shortage idea. It got popular attention with media reports about a handful of employers in the depths of the Great Recession who could not fill job openings. Then came a series of papers issued by consultants and business associations asking employers whether they were having difficulty hiring employees. Many were, but the investigators didn’t ask what was difficult, or investigate why.
The real issue is that employers’ expectations — for the skills of new graduates, for what they must invest in training, and for how much they need to pay their employees — have grown increasingly out of step with reality.
The first problem with the skills gap argument is that the employer reports, which form the entire basis of evidence, are about overall hiring rather than jobs filled by recent graduates. In other words, the complaint is really that companies are having trouble finding applicants at all career levels with the right work history, rather than not having enough recent graduates with the skills to be hired. Because the vast majority of job seekers have been out of school for decades, the complaints are really unrelated to what schools are doing now.
When employers are specifically asked about recent graduates, their complaints have nothing to do with academic skills. They often express the same concerns older generations have always had about young people — they are not conscientious enough, they don’t listen, they expect too much. Although you’d never know it from the news, the actual evidence on student achievement shows that U.S. students have actually been doing better over the past generation. Drop-out rates are down significantly, and scores on the standardized National Assessment of Education Progress tests show improvement in both math and English scores.
And while companies may complain young workers aren’t getting the right degrees, students are actually increasingly pursuing vocational majors that they hope employers will like. Business majors, for instance, outnumber liberal arts majors by as much as seven to one, depending on the definitions used. And since 2001, science, technology, engineering and math (STEM) degrees have increased at a rate equal to or greater than the overall increase in bachelor degrees being awarded.
These complaints reveal an unsettling truth: What employers really want are workers they don’t have to train. One of the studies I reviewed from the Chronicle of Higher Education asked employers specifically what they were looking for in new college grads. Only one of the top five priorities had to do with candidates’academic experience, even though this was for new graduates who have yet to take a full-time job.
Companies simply haven’t invested much in training their workers. In 1979, young workers got an average of 2.5 weeks of training a year. While data is not easy to come by, around 1995, several surveys of employers found that the average amount of training workers received per year was just under 11 hours, and the most common topic was workplace safety — not building new skills. By 2011, an Accenture study showed that only about a fifth of employees reported getting on-the-job training from their employers over the past five years.
A few of the employer surveys I reviewed do offer some more credible answers for why employers might not be finding the applicants they want. A surprising number admit they aren’t paying enough: Some 30 percent of U.S. employers in a 2014 survey by ManpowerGroup said job seekers were looking for more pay than was being offered. Still, just 14 percent said they were increasing starting salaries to fight the problem. Some employers also recognize they’re having trouble anticipating their own skill needs.
If something new really has happened, it’s that employer practices have changed. More companies are hiring from the outside rather than growing their own talent from within. This in turn has led to declining tenure among employees, who are more willing to jump ship. The real challenge we face is that if everyone is hiring for the ability to do a job, rather than for the potential to do it well, how does anyone get that initial experience?
Unfortunately, a great many policymakers have bought the skills gap view. Their conclusion is that we should make schools more responsible for training job applicants. Several state legislatures, for example, have been considering proposals to push college students into majors where employers want to hire.
We should rethink this fast. Schools are not good at providing what employers want, which is work-based skills and experience. Instead, employers need to be much more involved, not just in telling schools what they want but in providing opportunities for new grads to get work experience and learn the relevant expertise. We need a different approach: one where employers are not just consumers of skills, but are part of the system for producing them.
Peter Cappelli is the George W. Taylor professor of management at The Wharton School and Director of Wharton’s Center for Human Resources.