Employers have been complaining about skills shortages for at least 25 years. While some labor leaders and academics say the so-called skills gap is a myth, the chorus of employers has been persistent. On average for the past 10 years, more than one-third of the thousands of U.S. employers surveyed by ManpowerGroup have reported experiencing difficulty filling jobs, and of the top jobs they had difficulty filling, most required skilled workers. To help employers better understand the dynamics of skills shortages in the United States, the American Staffing Association (ASA) introduced the ASA Skills Gap Index in 2014. Designed to identify hard-to-fill occupations, the ASA index data reveal a paradox: Most hard-to-fill jobs require at least some advanced skills, but a small yet significant number of those jobs are low-skill occupations. This article describes the ASA Skills Gap Index and the implications of this skills gap paradox.
THE ASA SKILLS GAP INDEX METHOD
The ASA Skills Gap Index is derived from two key inputs. The first is a categorization of jobs in the Standard Occupational Classification system of the U.S. Bureau of Labor Statistics. The second and principal input is a metric derived from the supply of job candidates relative to demand. Supply and demand is based on more than 90 sources utilized in CareerBuilder’s Supply & Demand Portal.
CareerBuilder calculates a hiring indicator score for all jobs. The difficulty to fill those jobs is scaled from 1 to 100, with higher scores for those jobs that are easier to fill. The hiring indicator scores take into account the following: (1) demand for the occupation (job openings), (2) supply of active candidates, and (3) the occupation population. The ASA Skills Gap Index focuses on jobs with a hiring indicator score of 50 or lower (i.e., jobs that are harder to fill). The ASA Skills Gap Index also incorporates a demand threshold, which is set at 2,000 job openings nationally per occupation. The demand threshold effectively screens out relatively uncommon jobs that lack wide appeal, whether to employers, job seekers, or policymakers. For example, it may be hard to fill a farrier job, but the demand for people who shoe horses is limited these days. Still, there are relatively low-volume occupations that have surpassed the demand threshold (albeit narrowly), ranging from choreographers to physicists to wind-turbine service technicians. The ASA Skills Gap Index is issued quarterly. The number of hard-to-fill jobs and a top-10 list nationally are publicly released and widely published. ASA also prepares lists by U.S. region (Northeast, South, West, and Midwest) and occupational sector ( engineering, information technology (IT), and scientific; health care; industrial; office-clerical and administrative; and professional-managerial). These specialized lists are made available to ASA members.
GENERAL FINDINGS AND ANALYSIS
In the first quarter of 2015 — the most recent period for which data were available as of this writing — the ASA Skills Gap Index identified 181 hard-to-fill occupations in the United States for the 12 months that ended in March. The 10 most difficult jobs to fill nationally were:
1. Occupational therapists
2. Heavy and tractor-trailer truck drivers
3. Physical therapists
4. Photographic-process workers and processing-machine operators
5. Occupational-therapy assistants
6. Speech-language pathologists
7. Family and general practitioners (physicians)
8. Merchandise displayers and window trimmers
9. Nurse practitioners
10. Physician assistants
Seven of the top 10 hardest-to-fill occupations nationally were in health care (i.e., skilled occupations). The remaining three required little or no job-related training (i.e., low-skill occupations). Among the 181 hardest-to-fill occupations, 71 were in the professional-managerial sector; 53 were in health care; 32 were in engineering, IT, and scientific; and 25 were in industrial. No office-clerical or administrative occupations were hard to fill at a nationwide level in the first quarter of 2015. Geographic distribution among the 181 hardest-to-fill occupations was similar across U.S. regions, with 177 (98 percent of the national figure) in the West, 164 (91 percent) in the Northeast, 155 (86 percent) in the South, and 154 (85 percent) in the Midwest.
In the professional-managerial sector, sales and marketing occupations figured prominently in terms of being both harder to fill and in greater demand. Seven of the top 10 hardest-to-fill jobs in this sector were insales or marketing occupations. Six of the top 10 in demand volume in this sector were also sales or marketing occupations, totaling nearly 7 million job postings.
In health care, 10 of the 53 hardest-to-fill occupations were physician jobs. But registered nurses are by far the occupation most in demand in this sector, at 2.88 million job postings. That single occupation accounts for more than one-third of the total demand for hard-to-fill occupations in health care.In the engineering, IT, and scientific sector, 15 of the 32 hard-to-fill occupations were in engineering and 14 were in IT — with the demand of 1.27 million for application software developers well above any other occupation in the sector.
In the industrial sector, heavy and tractor-trailer truck drivers leads the list of hardest-to-fill occupations. It stands out among all difficult-to-fill jobs because of its extraordinarily voluminous demand: 9.46 million — more than three times the demand for registered nurses, which ranked second overall.
HOW EMPLOYERS CAN BRIDGE THE SKILLS GAP
Today, more than 8 million people are actively looking for work. Meanwhile, more than 5 million jobs go unfilled. Numerically, there are more than 1.5 job seekers for each job opening. The mismatch between the number of job seekers and the number of job openings, employers say, is largely due to job seekers lacking the skills required for today’s job openings. The mismatch is likely to worsen as the economy grows, the unemployment rate declines, and the labor pool shrinks. Only six of 10 working-age individuals are currently employed or even seeking work. As baby boomers retire, they take their skills with them. New entrants into the workforce are ill-prepared for the real world of work, employers say. Too many teenagers drop out of school. Too few go to technical school to learn skills in high demand. Too many go to college to earn degrees in fields with meager employment opportunities. Although there may, indeed, be a shortage of candidates with particular skills in the workforce, employers must shoulder some of the blame for this skills gap. Too often, employer expectations are unrealistic, specifying rare skills that may not really be required or that could easily be learned on the job. Apprenticeships and on-the-job training programs have been terminated as job descriptions have become elongated with detailed requirements. In addition, employers too often fail to pay wages sufficient to attract the talent they seek.
ASA compiled recent examples, described as follows, of strategic solutions employers can use to help bridge the skills gap.
Reassess Position Requirements
A client in the health care sector had difficulty filling surgical technician jobs. The client’s position description required Level I trauma, orthopedic, neurological, and teaching-facility experience. The client’s staffing firm assessed the candidate market and convinced the client to revise the position description to require either ortho or neuro experience, not necessarily both. The client then no longer had difficulty filling the position. In the industrial sector, clients seeking construction professionals may insist that candidates have “commercial-only” experience. Knowing that the supply of such candidates is limited, the staffing firm advised its clients to at least interview candidates who have applicable multifamily or residential
construction experience. Those clients have since improved their hiring success.
Consider Skill Development
What was the solution? The client’s staffing firm agreed to offer free SAP (systems application products) training for candidates who met the other necessary criteria for the positions (i.e., clean criminal background checks and who passed competency tests for Microsoft Excel, PowerPoint, and Word). In the health care sector, a client required registered nurses to have experience with EPIC software. Considering how difficult it is to fill nursing vacancies, the client agreed to consider candidates lacking EPIC experience but who were otherwise qualified for the position and, if hired, to provide full training in EPIC.
Make Compensation Attractive
A staffing company in the industrial sector had been advising clients to offer a wage premium for specialized skills. In other words, don’t expect to get a higher skilled employee if you’re paying only average wages. Average wages equal average skills. Employers requiring above-average skills need to pony up with above-average pay. For example, a welder averages $13 to $14 per hour, but one with fabrication experience gets $20 to $25. Similarly, a maintenance mechanic might earn $20 to $22 per hour, but to get one with programmable logic controller (PLC) programming experience, companies should expect to pay at least $8 more per hour. Employers with professional-managerial job openings — the sector with the most hard-to-fill occupations — may be keen on variable compensation packages. But staffing firms are reporting that candidates for hard-to-fill jobs may be reluctant to even consider positions without guaranteed salary and benefits. To attract talent to difficult-to-fill positions, employers need to be flexible in crafting their compensation packages, perhaps guaranteeing a bonus to boost the candidate’s total compensation.
JOBS POLARIZATION AND THE SKILLS GAP PARADOX
Massachusetts Institute of Technology labor economist David Autor cites a decades-long trend that significantly intensified during the Great Recession: the polarization of job opportunities in the U.S. labor market. U.S. employment growth is becoming increasingly concentrated in high-skill, high-wage jobs and low-skill, low-wage jobs, while the middle ground is shrinking. Since the mid-1970s, Autor says, the rise in U.S. education levels has not kept up with the rising demand for skilled workers. The slowdown in educational attainment has been particularly severe for men, and the result has been a sharp rise in wage disparity. In 1980, he notes, workers with a four-year college degree earned 50 percent more per hour than those with a high school diploma. In 2008, they earned 95 percent more.
An important factor behind the widening wage gap is the polarization of job opportunities: They are either high-skill, high-wage professional, technical, or managerial occupations, or they are low-skill, low-wage food service, personal-care, or protective-services jobs. Middle-skill, white-collar clerical and administrative occupations, and middle-skill, blue-collar production, craft, and operative jobs are in decline. Employment losses during the Great Recession were more severe in middle-skill white- and blue-collar jobs than in either the high-skill, white-collar occupations or in the low-skill service jobs. This phenomenon is not unique to the United States; it is widespread across industrialized economies.
Key contributors are the automation of routine work and, to a lesser extent, the international integration of labor markets through trade and, more recently, offshoring. This polarization explains the skills gap at the upper end. Demand for some high-skill occupations is growing faster than supply, making them hard to fill. But what explains the skills gap paradox at the low end? If the supply of low-skill labor is plentiful and growing, why are some low-skill jobs hard to fill? Could it be pay? Of the three low-skill jobs in the most recent ASA Skills Gap Index top hardest to-fill jobs, two typically require no more than a high school diploma and one (truck drivers) requires some job-specific training.
RECRUITMENT AND RETENTION PRIORITIES
New research from ASA provides important recruitment and retention insights for employers with hard-to-fill jobs. In short, work-life balance trumps pay for many employees. Quality of life matters in retaining current employees. Compensation matters most in recruiting employees to change jobs. The ASA Workforce Monitor, a study conducted by Harris Poll to identify workforce trends and issues, found relatively few adults engaged in the job hunt. In the March survey of 1,000 U.S. adults age 18 and older, 62 percent of those employed expressed little likelihood of seeking new job opportunities this year. Work-life balance and schedule flexibility rated higher than pay or wage potential in what employed adults value most about their current jobs. But pay or wage potential and benefits would be the most important considerations in deciding to change jobs. Moreover, the findings suggest that employers need to be realistic in attempting to tap the pool of unemployed. Four in 10 able-bodied, working-age unemployed adults (38 percent, excluding retirees) have no plans to look for a job this year. Relocation for new employment is an unlikely factor, too. More than 7 in 10 survey respondents reported they are unlikely to relocate for a new job. Among those unlikely to move, half said they prefer where they live and don’t want to change, and 4 in 10 don’t want to leave family and friends. Two-thirds of those more likely to move for a new job say pay or wage potential would be most important in deciding whether to relocate, with benefits close behind as another consideration.
For employers with positions in the 181 hardest-to-fill occupations identified in the ASA Skills Gap Index, the ASA Workforce Monitor suggests two key strategies:
- To retain employees, companies need to focus on work-life balance and schedule flexibility.
- To recruit new employees, companies are going to have to pay more. Certainly, they need to reassess the job requirements and consider skill development to expand their talent pool, but ultimately, compensation will probably be the most powerful lever to get someone to budge.
This article was originally published on American Staffing Association’s website.
ABOUT THE AUTHOR: Steven P. Berchem, CSP, chief operating officer of the American Staffing Association, has general management responsibilities with principal oversight of the association’s research, publications, public relations, marketing, corporate alliances, information systems, and meetings and events operations. He is frequently consulted by business executives, industry analysts, government officials, and academics for his expertise in industry research, data, and economics. Before joining ASA in 1998, he held executive positions with Washington, DC, think tanks and associations.