With the economic recovery stuck in low gear, Tammy Krings has something of a happy problem for her growing, Columbus, Ohio-based global travel business, TS24.
Some 17 years after starting with out three employees, Krings is wrapping up a barnburner year. The company booked so much new business in 2012, she's had to hire 60 new employees – up from a staff of 120 in January.
Faced with that kind of rapid growth, Krings says she ran smack into one of the biggest hurdles cited by many employers today: the so-called “skills gap.”
“My frustration is you keep hearing about these unemployment numbers, but we have a very, very difficult time finding qualified people,” she said.
Researchers and staffing consultants say Krings' frustration is widespread, the result of a host of powerful forces jarring the labor market – from the ongoing, rapid infusion of technology into the workplace to the decline of vocational training in the American education system and the ongoing, mass exodus of a generation of skilled baby boomers headed for retirement.
As a result, Krings learned what labor economists and staffing consultants say is the hard reality of finding skilled workers in a rapidly changing workplace.
If you can’t find what you’re looking for, try harder. And if that doesn’t work, you may have to cough up the money to train the best new hires you can find.
“We’ve been able to find the types of people that we want as long we are willing to invest in them to bring them to the level of skill that we need,” said Krings.
But millions of small- and medium-sized employers, the businesses that create the bulk of new jobs, are apparently unwilling or unable to spend the money to bring new hires up to speed.
“I don’t think companies are confident enough right now to make big investments (in training)," said Melanie Holmes who has tracked workplace issues in a 30-year career with Manpower, a global staffing company. “They want to hire someone who can be productive tomorrow."
There’s no debate about the increased demand for higher-skilled workers in an economy that relies more heavily every year on advances in technology to raise the productivity of each worker. That’s why the jobs that employers said they had the hardest time filling in 2012 were skilled trades, engineers and IT Staff, according to a Manpower survey.
“It used to be all you needed was a strong back and an alarm clock to get a really good, family-sustaining job in manufacturing,” said Holmes. “Unfortunately for individuals – and fortunately for companies – technology has changed that. You need at least some post-secondary education.”
But a decades-long shift in emphasis on four-year, liberal arts college degrees has drained the supply of students entering job-based, vocational and technical schools. Employer- and union-sponsored training programs have also become artifacts of the last century, according to Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School who heads the school’s Center for Human Resources.
“Apprenticeship programs have collapsed,” he said. “We’ve got, by far, the least apprenticeship training per capita than any other industrialized country.”
That has shifted the burden of skills training to employers – a burden many say they’re unwilling or unable to take on. The current dearth of company-sponsored training programs is also, in part, a hangover from the mass layoffs and hiring freezes that accompanied the Great Recession.
“Training was one of the first things that we cut during the downturn because we weren’t hiring,” said Krings. “If you’re not hiring, you don’t need to have anyone on board to train new hires.”
But with the economy now in its third year of a halting recovery, many companies continue to defer spending on training.
“It comes down to an excuse of budget limitations,” said David Smith, a human resources consultant at Accenture. “The biggest issue probably is return on investment. It’s hard to measure the results. But it’s a poor excuse. People just get hung up so quickly on that point and they’re very, very short-sighted.”
Some companies simply don’t get it. Many of the “skills gap” complaints are coming from small companies that have limited or no human resources expertise, according to Capelli.
“If they don’t have anybody in house who understands recruiting and training and development, then there’s nobody to explain to management ‘We’re looking in the wrong places’ or ‘We can’t pay this much and expect to get the people we want.’ “
One simple solution would be to raise wages. The laws of economics suggest that if something is in short supply, prices should rise until demand is satisfied. If a computer programmer can earn $50 an hour working for a software company, she has little incentive to accept a $25 an hour job programming a manufacturing robot.
But Krings says she just can’t afford to pay the salaries that the best applicants are asking.
“Our customers don’t want to pay the rate they were paying three years ago,” she said. “We’re doing more for less today.”
Like Krings, most employers apparently are unwilling or unable to pay higher wages to compete for better skills. Manpower’s survey found that only 11 percent had increased starting salaries in 2012 to help recruit talented workers. More than three times as many said they preferred to provide additional training to existing staff.
Some hiring managers just give up looking and defer new hires, assuming they'll save money that will add to profits. But that strategy generates a false sense of economy because few employers account for just how much those unfilled jobs are costing them, said Capelli.
“You can’t account for lost opportunities, or the work that’s not getting done, or the burnout of your employees -- who all want to get out of there now because they feel you're abusing them with overwork,” he said. “You can’t account for any of that stuff, so it looks like you’re saving money.”
Though tight budgets and a weak economy may have crimped companies' spending on training and bigger paychecks, hiring managers bemoaning the "skills gap" may be in for a rude shock if the economy picks up speed next year. With increased demand for talent, the “skills gap” will only worsen as more companies have to draw from the same pool of workers, said Holmes.
“I think it’s going to worse before it gets better,” she said. “If business does come back year next year, we’re not going to have enough people."