By Alessia Leibert
A skills gap is the difference between the skill levels of the available workforce and the skills necessary to meet job requirements. Skills gaps have often been used as a simple narrative to explain the contradiction between the current high level of unemployment in the United States and the alleged inability of employers to fill open positions. This over-simplified narrative, however, has suffered from two main flawed assumptions:
To investigate the existence and causes of hiring difficulties in Minnesota and determine how many are specifically attributable to skills gaps relative to other factors, the Minnesota Labor Market Information Office rolled out a Hiring Difficulties Survey based on its existing semi-annual Job Vacancy Survey.
Quick Facts: Hiring Difficulties Survey
Figure 1 displays the main survey findings. Less than a half (43 percent) of all vacancies reported in spring and fall of 2012 were hard-to-fill. Hiring difficulties varied widely by occupation, with Nursing having the lowest incidence (32 percent) and Production having the highest incidence (68 percent).
When vacancies are broken down by industry (Figure 2), the same high concentration — above 50 percent — of hiring difficulties exist in the Manufacturing sector as in Industrial Engineering and Production, occupations almost exclusively found in Manufacturing industries. Both results point to Manufacturing as the segment of Minnesota’s economy where employers are struggling the most to fill available openings.
Hiring difficulties also varied by region. Fifty two percent of vacancies in Greater Minnesota were hard to fill compared to the Twin Cities Metro Area with 36 percent.
These overall findings about the magnitude and distribution of hiring difficulties serve as a background to the next section of the article that takes a closer look at the nature and potential causes of hiring difficulties and, specifically, at the incidence of skills gaps.
In order to identify hiring difficulties, employers were first asked “Did you have — or are you having — difficulties filling the position?” Next, they were given an opportunity to share their perspectives about why some positions are hard to fill, choosing from two main areas: supply-side factors or demand-side factors.
While employers reported general hiring difficulties in 43 percent of vacancies, only 15 percent of all vacancies were hard-to-fill exclusively because of skills mismatches (Figure 3).
Far more common were hiring difficulties where employers also identified a demand-side problem in conjunction with a supply-side problem. This indicates that skills mismatches rarely occur in isolation from demand-side factors. Least common were hiring difficulties that were attributed exclusively to factors unrelated to the supply of skills.
When responses are broken down by experience level as shown in Figure 4, we notice a high concentration (42 percent) of purely demand-driven hiring difficulties in vacancies requiring less than one year of experience, corresponding to the entry-level job market. When asked to identify the reasons for hiring difficulties in this group of vacancies, employers attributed 40 percent fully or in part to unattractive wages/compensation.
Interestingly, pure skills mismatches were not concentrated in high-experience vacancies as one would have expected, but rather in vacancies requiring intermediate work experience, from one to three years. The difficulties in filling high-experience positions were overwhelmingly caused by a mix of supply and demand issues. A closer look at these cases reveals that 87 percent were caused by the inability to find candidates with specialized skills, yet one-half of these also mentioned location as a contributing factor. This result is a clear demonstration of how supply problems can interact with other issues like geographic mismatches. Some employers feel that attracting experienced workers would be much easier if the firm were located in a different area. An additional and unexpected finding was that Greater Minnesota regions experienced geographic mismatches at rates not much higher than the Metro Area. Some of the locations indicated as “problematic for hiring” were actually in the Twin Cities Metro Area.
Some surprising results also emerge in the distribution of skills mismatches by education level (Figure 5). In fact, employers were more likely to report skills mismatches as the exclusive reason for hiring difficulties for jobs requiring no post-secondary education (57 percent). On the other end of the spectrum, for positions requiring a bachelor’s degree or higher, pure skills mismatches were cited in just 32 percent of the cases, and demand-side reasons in 22 percent of cases. The implication is that, in general, education level alone is not driving skills mismatches.
Thus, skills mismatches were sometimes found to be related to inadequate levels of experience, but not to inadequate levels of education. This demonstrates that skills mismatches, as a cause of hiring difficulty, cannot automatically be assumed to be the result of a shortage of skilled workers.
When responses are broken down by occupational group (Figure 6), three scenarios emerge:
It is important to recall that these occupations were intentionally selected precisely because of anecdotal evidence of skills-related hiring difficulties. Therefore, there was a high probability of finding skills gaps in these fields.
Following are the summarized results by occupational group.
Among all occupational groups surveyed, Nursing had the lowest incidence of hiring difficulties at 32 percent (Figure 1). Of that minority only a small subset (18 percent) were perceived by employers as related exclusively to skills mismatches, while 27 percent were exclusively caused by demand factors, and the remaining 55 percent were driven by a combination of supply and demand factors (Figure 6).
When skills mismatches were cited as a problem, the challenge for employers was finding candidates with experience in a specific role or industry as opposed to more formal education. The following quotations illustrate this important finding:
When demand-side factors were cited as the main challenge, undesirable location was most frequently mentioned, followed by substandard wages or compensation, undesirable work shifts, and competition from other employers to attract the most experienced candidates. Here are a few quotations:
Overall, advanced specialty nursing vacancies — which included Nurse Practitioners and Nurse Anesthetists — were much harder to fill than Registered Nurses vacancies. This obvious lack of evidence of a shortage of RNs might be the effect of years of effort by the Healthcare Industry to alert career seekers and educators to potential future shortages as well as a very successful effort on the part of post-secondary institutions in Minnesota to align the supply of nursing graduates with the anticipated industry demand.
As illustrated in Figure 1, one out of two industrial engineering vacancies were reported as hard to fill. One out of three hard-to-fill positions was perceived as driven by skills mismatches with no other demand-side factors identified. The overwhelming reason for hiring difficulties, accounting for 57 percent of cases, appears to be a blend of supply and demand factors (Figure 6).
Employers’ comments reveal that finding new graduates in engineering was not a problem for employers. Rather, applicants lacked hyper-specialized experience or a unique blend of skills that could be extremely difficult to find even when plenty of people apply. The following quotations illustrate this point:
The difficulty in Engineering seems primarily one of matching the experience requirements of a vacancy with the experience profile of those who apply. Unfortunately, this match is hard to achieve even through additional years of training or experience if that additional training is not specifically tailored around the needs of a particular industry or even an individual employer. That’s probably why some employers prefer to hire engineering candidates with work-based experience such as internships.
As illustrated in Figure 1, hiring difficulties impacted only 37 percent of vacancies in IT occupations. Of that minority, the reasons for the difficulties were fairly evenly split between those exclusively from skills deficiencies (37 percent), those exclusively from unattractive demand or other factors (32 percent), and those from a mix of skills deficiencies and unattractive demand (31 percent).
In IT as in engineering, the main supply-side problem was work experience and — importantly — the skills obtained through that experience.
The tendency to set very stringent qualification requirements in the IT field is mainly the result of rapid technological changes and the consequent proliferation of technological platforms that, once adopted by a firm, must be maintained by professionals with hyper-specialized knowledge or experience (Java versus .NET, for example). As new IT graduates learn the most advanced technologies, and seasoned employees trained in ‘niche’ technologies or even in technologies that are becoming obsolete start to retire, employers face the problem of maintaining legacy systems that newly minted grads may not have learned or may not be interested in working with compared to newer technological platforms. However, sometimes employers can deliberately set very stringent qualification requirements because the candidate pool is large enough that they can be particular. Here is a quotation from a respondent who did not report any hiring difficulties with their IT positions:
Formal education, while often preferred, was not generally considered absolutely necessary in IT vacancies. Fourteen percent of IT vacancies included in the survey did not require any formal education at all. Often, specific skill sets and previous work experience were much more important to the employer than the degree of formal credentials.
Where other issues besides skills mismatches were indicated as a challenge, the primary ones were non-competitive wages, low mobility of the workforce, and lack of interest in the nature of the work. The following quotations illustrate these challenges.
Strategies such as making IT workplaces more attractive to new STEM graduates (especially women), creating incentives for seasoned employees to stay with the firm, and producing frequently updated career information that advises candidates on in-demand skill sets could be effective ways of addressing some of these problems.
Hiring difficulties were substantially more prevalent in Production occupations, which included Machinist, CNC Machinist, and Computer-Control Machine Tool Operators. Two out of three vacancies or 68 percent were reported as hard to fill (Figure 1), and skills mismatches alone affected one half of the cases. Unique to Production occupations is the absence of demand-side factors cited as the only reason for recruiting difficulties. As previously mentioned (Figure 6), surveyed Manufacturing employers attributed all hiring difficulties in these occupations to supply issues, either alone or in combination with demand issues.
The following quotations from respondents illustrate these points:
When supply-side factors were cited as a problem, three main issues emerged: inadequate experience of applicants, inadequate training of applicants, and/or overall low number of applicants for Production openings. Below are some illustrative comments from respondents:
To summarize, employers labeled as skills mismatches the difficulties they encountered when trying to fit the specific experience requirements of a job with the experience profile of candidates. Unfortunately this match is hard to achieve even when supply of qualified labor is abundant. Additionally, the emphasis given to industry-specific experience is bad news for the long-term unemployed, especially if their previous job was in a shrinking industry. The lack of workforce attachment can seriously prevent candidates from demonstrating the relevance of their skills and cannot simply be compensated by holding the right educational credentials.
If the impact of skills gaps is severe, we would expect a high proportion of those skills-related, hard-to-fill vacancies to remain unfilled at the time the survey was conducted — typically two to five months after the position was posted. What we see, instead, is that 61 percent were successfully filled, suggesting that most skills mismatches were only a temporary challenge.
When asked which strategies they would use or are already using to respond to hiring difficulties, employers volunteered the following suggestions:
Enhancing internal training and collaborating with education institutions were the most frequently mentioned strategies, because employers recognize their value. The benefit of partnering with local schools appears to be particularly critical in Greater Minnesota.
In conclusion, skills gaps are often just the tip of the iceberg of a much broader and more intricate set of factors. There is a need for targeted interventions at various levels of the education system to allow early exposure to careers in skilled trades. Such exposure will increase student interest in technical vocational degrees. Equally important is the role employers can play to improve access for students and job seekers to work-based learning opportunities that develop the most needed skills.
Location can be problematic either because rural areas are hard to commute to or because semi-urban areas have a high concentration of manufacturers that compete for the same candidate pool.
One respondent who experienced hiring difficulties commented: “We think it might help to utilize some of our education partners and target schools to see if they have students that are interested in applying. Since part of the issue is our location (hard to get people to relocate or travel) it might help to target the schools in the area.”