As the pace of change accelerates in our age of information, few things remain the same. And like product cycles, skills cycles have been shortened. For example, “A skill cycle that once ran for three years now lasts just nine months,” says Manpower Inc., a leader in the employment services industry. Plus, finding the right employees with the appropriate skills in the first place is proving more difficult than ever. What does this mean for your business?

U.S. Labor Trends

The U.S. Bureau of Labor Statistics (BLS) says that during the period of 2006 through 2016, “growth in the labor force is projected to slow significantly for two reasons: the babyboom generation is aging and retiring, and the labor force participation rates of women have peaked.” As a result, “The labor force is expected to grow at an annual rate of 0.8 percent during 2006-2016, compared with a rate of 1.2 percent from 1996-2006.” Although BLS does not project an outright labor shortage, several other organization do, especially with regard to highly skilled workers.

As early as 2004, Deloitte Research said “Despite millions of unemployed workers, there is an acute shortage of talent: science educators to teach the next generation of chemists, health care professionals of all stripes, design engineers with deep technical and interpersonal skills, and seasoned marketers who understand the Chinese marketplace.”

In 2005, the National Association of Manufacturers (NAM) said 81 percent of surveyed recipients face a moderate or severe shortage of qualified workers. And more than half of all manufacturers surveyed said 10 percent or more of their positions were unfilled due to lack of the right candidates. The shortfall was reported greatest in skilled trades.

A 2007 survey by Manpower Inc. found that 41 percent of U.S. companies said they had difficulty filling positions. This mirrored the global average, which involved nearly 37,000 employers in 27 countries and territories.

In December 2007, a report published by the Peterson Institute for International Economics, a Washington, D.C. think tank, said “America rose to economic prominence on the shoulders of the most highly skilled workforce in the world. However, during the last 30 years, skill levels in the U.S. workforce have stagnated. In the coming decade, America could face broad and substantial skill shortages.”

Blue-collar jobs and middle-skilled jobs, such as carpentry, also are becoming harder to fill. Even bank positions remain vacant in some cities. In the coming years it is clear: the ability for employers to find qualified workers will worsen.

Not Well Prepared

Trends in secondary education suggest that schools may not be delivering globally competitive educations. According to the Alliance for Excellent Education, a national policy and advocacy organization in Washington, D.C., only 70 percent of U.S. high school students graduate, one of the lowest rates among industrialized nations; of these, however, only half are academically prepared for postsecondary education.

Furthermore, the interest of American students in science and technology has eroded over time. Thus, NAM noted “by 2001, less than one in 10 of all degrees awarded in the United States were in engineering, mathematics or the physical sciences. This constitutes more than a 50 percent decline from 1960.” As we entered the 21st century, NAM said “China graduated 3.5 times the number of engineers as the U.S., and Korea — with an economy less than 10 percent the size of ours — was graduating roughly the same number of engineers.”

Education Is Key

According to Federal Reserve Chairman Ben Bernanke, “Education fundamentally supports advances in productivity, upon which our ability to generate continuing improvement in our standard of living depends.” Education also leads to greater happiness and personal fulfillment. Plus, the economic returns to employees are substantial.

Bernanke states “In 2006, the median weekly earnings of college graduates were 75 percent higher than earnings of high school graduates. In turn, workers with a high school degree earned 42 percent more than those without any diploma.” He also indicated that the supply of educated workers has not kept pace with the demand.

The skills shortage is very troublesome, especially since the U.S. Department of Labor says 85 percent of future U.S. jobs will require advanced training, an associates degree, or a four year college degree. Minimum skills will be adequate for only 15 percent of future jobs, the agency says.

Upskill Your Workers

It’s argued that more and more manufacturing jobs will move out of talent-poor developed countries and into lower-wage developing economies. On the other hand, Manpower Inc. says there is growing evidence that fast-rising wages in India, China and other developing countries are an indication of talent shortages there. Consequently, offshoring by U.S. firms could incur new problems.

Nevertheless, to remain competitive, U.S. employers will need to invest more in employee training programs, continually refresh and upgrade employee skills, and work with local universities and community colleges to ensure courses are offered that satisfy market demands. In addition, through automation, employers will need to reduce the number of jobs where talent is limited, draw on previously untapped human resource potential, and create more attractive working conditions to entice and retain workers. And this very much applies to older workers, the largest available untapped workforce segment. Americans are living longer heathier lives and able to contribute well after their first retirement.

This article appeared in Impact Analysis, March-April 2008.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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