What’s really driving the skills gap?

February 17, 2016

By Claudine Kapel, Canadian HR Reporter |

Many organizations say they’re concerned about skill shortages and the ability to source and recruit the talent they need — especially talent with the requisite technical skills.

A common viewpoint is skill shortages are arising because the needed talent is simply not available in the market.

But a new research paper suggests the real culprit behind skill gaps is organizations are unwilling to pay what is needed to recruit and retain such talent.

“It is often taken for granted that the skills gap and skills mismatch is a supply problem and appropriate training is not available to workers,” said Thijs van Rens, associate professor in the University of Warwick’s department of economics.

“However, U.S. data shows that market wages do not reflect the relative demand for different types of skills,” says van Rens, whose paper is entitled “The Skills Gap: Is It a Myth?”

His premise is the lack of workers with skills in science, math, engineering and technology (STEM) and “soft” communication skills is “not due to problems with the education system, but to employers being unwilling to offer higher wages to suitably skilled workers.”

Van Rens notes that concern about the skills gap is growing in advanced economies. He observes the concerns are often focused on shortages of workers with skills in STEM subjects, but increasingly also on “soft skills” like problem-solving, teamwork and communication.

For his study, van Rens examined U.S. labour market data, looking at job finding rates and unemployment due to skills mismatch across states and industries going back to 1979.

The research found that the main reason the skills mismatch persists in the U.S. labour market is “that wages do not adjust in response to differences between demand and supply of skills.”

Accordingly, van Rens argues that reforming the education system won’t resolve the perceived lack of appropriately skilled workers. “As long as wages do not reward certain skills, workers will be less likely to acquire them,” and even if they do, they “will find employment in higher-paid occupations that do not utilize these skills.

His research found, for example, that while U.S. organizations complain about a shortage of qualified physicists and engineers in the labour market, “a very large number of graduates in these fields work in the financial sector, where they only use their STEM skills to a very limited degree.”

To that end, van Rens observes “encouraging universities to educate more physicists and engineers will not make any difference if these additional STEM graduates look for jobs in investment banks.”

He suggests that more research is needed to better understand why wages are not rising in response to skill shortages to close the skills gap.

– See more at: http://www.hrreporter.com/blog/compensation-rewards/archive/2016/02/17/whats-really-driving-the-skills-gap#sthash.wHsFsog4.dpuf

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