Why this blog?
Today, October 15th, UNESCO is unveiling its 2012 Global Monitor Report focusing on youth unemployment. www.efareport.unesco.org. As part of developing background papers for the report, I reviewed over 120 employer reports on skills gaps from over 40 countries around the world. I also wrote four country case studies on skills gaps, including the U.S., India, Brazil, Egypt, and a global overview of what employers around the world say is missing in terms of skills. The purpose of this blog is to share the findings and to explore whether skills gaps are a symptom of a deeper gap – the communications gap between employers, educators, their governments, and of course, job-seekers.
CEOs from around the world say “lack of talent,” business speak for skills gaps, is one of their most pressing concerns. In both developed and developing countries, skills gaps are constraining companies’ ability to grow, innovate, deliver products and services on time, meet quality standards and meet environmental and social requirements in countries where they operate. Closing skill gaps directly impacts improved productivity, employment, and enterprise creation. For example, the headline in a recent HBR blog asks, “If Unemployment Is So High, Why Is Hiring So Hard?” And the 2012 PWC survey of global CEOs finds that developing leadership and talent pipeline is the no. 1 concern of global employers.
When I reviewed 120 employer reports of skills gaps from 120 countries, including the U.S., I noticed companies’ difficulty with filling vacant positions stems from two sources: 1) skills shortages (i.e. not enough graduates at a particular level of education or in the right field of study) and 2) skills mismatch (i.e. whether young people are educated or not, they lack the skills to fill the position. Two types of skills are missing: First, the technical, or “hard” skills, such as knowing how to use different computer programs or running a machine, or producing a high quality item. The second type of missing skills are the soft skills, such as knowing how to operate in a particular workplace culture, knowing how to interact, speak and listen, and knowing how to manage oneself and available resources.
After 25 years experience with workforce development systems in 42 countries, I’d like to suggest that the underlying problem comes from a lack of communication between educators, employers, and government policymakers about what skills the country and its industries need to compete now and in the future. This chronic lack of communication results in a skills gap – a misalignment of the education system to the needs of the labor market in countries, states, and communities. This lack of communication has an especially severe impact on youth in poor communities throughout the world, where there are few paths out of the poverty trap. The misalignment between education and employment is exacerbated as new technologies continue to shift skill requirements for how work gets done, such as lean production and integrated supply chain management (digital economy). For example, in traditional manufacturing, a source for low skilled jobs, workers repeat one operation hundreds of times throughout the day. However, in much of the world, manufacturers are moving to lean production methods, where teams of workers and robots analyze data, work through breakdowns, and collaborate to run production processes far faster, with fewer defects and lower costs.
Closing the skills gaps is entirely doable. We have models from whom we can learn. For example, in many of the northern European countries and Asian tigers employers regularly talk to educators about their current and future skill needs. In these countries the ongoing conversation is institutionalized at national and local levels through industry associations and Chambers of Commerce. And companies invest heavily in learning at work – long before they hire any of the young learners. In the mid-90’s I asked the CEO of a German multinational company why he spends $11,000/year on a high school student learning engineering skills three days a week at his and other companies. His answer surprised me because it didn’t have to do with education or training. It had to do with his industry’s ability to export high value at a competitive price point. Here’s what he told me:
“Ms Aring, it’s not about education. We do this because we have no natural resources of our own to export. We have to import just about everything. How do we pay for what we import? With the things we export. And we cannot export cheap products; China and others have far lower labor costs. So to get a high price for our products they have to be top quality. This means we have to keep our labor costs competitive. If we don’t have an abundant supply of highly skilled labor, our labor costs (and therefore the costs of our products) will go up and we will not be able to export as much. So it is in our interest to make sure we have an abundant pool of highly skilled labor. How do we get that? We collaborate to compete. By sharing the costs to develop students to entry level skills so that we can employ them— if we think we like what they have to offer. Instead of waiting until they graduate and then trying to fix a skills gap problem, we partner with educators to develop shared, industry-wide standards for the competencies the members of our Industry Association say we need. Later, we compete as we spend our own training dollars on the people we hire so that our employees have the highest skills possible.”
Like most other countries, the U.S. has significant skills gaps. These are so severe that 81 percent of the National Association of Manufacturers members report a moderate to severe shortage of skilled workers. Skills gaps are a major issue for many other countries around the world where economic stability would make a big difference for youth who want a better future but don’t see how they can have it. For example, skills gaps are severe in most of the Arab countries, which have among the highest youth populations in the world. Skills gaps constrain 67 percent of Brazil’s companies from growing and are a widespread concern of companies throughout Latin America. Likewise in Africa, employers from Ghana, South Africa, Namibia, Senegal, and other countries say the problem is so severe that the only solution is to bring in skilled workers – while their own citizens suffer from record un- and under employment. So how can the U.S. and other countries close their skills gaps? I think that both educators and employers must create a new and different conversation. Above all, I think it’s time companies saw that a country’s education system is a part of their supply chain, starting a dialog with educators about quality standards for education, including university grads. For example, even students with university degrees have significant skills gaps, according to employers in a 2006 McKinsey survey:
Skills gaps are one of the problems that can be fixed. At a time of enormous youth unemployment what would it take for employers to recognize that the education system is a part of their human capital supply chain? What would it take for educators to talk systematically with employers about the skills that are now needed and will be needed? How can governments and civil society help broker and foster these conversations? Because they’ll need to continue as long as there are companies who need talent, people who want jobs and countries that want to thrive.
 Robert Moritz, Harvard Business Review blog March 20, 2012