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Funding scarce for training new hires

Millions of jobs go unfilled in the U.S. because employers can’t find skilled workers.  But many companies are reluctant to invest in training new hires. By John W. Schoen.
Image: Barack Obama, Chuck Swoboda, Jeff Immelt, Matthew K. Rose
President Barack Obama, second from left, tours the manufacturing facilities of Cree, a manufacturer of energy-efficient LED lighting. Obama used the visit to underscore the need for more training of engineers. Carolyn Kaster / AP

There’s widespread consensus that millions of jobs go unfilled in the U.S. because employers can’t find skilled workers.

But there’s less agreement on where the money will come from to train those jobless workers. Nobody, it seems, wants to pick up the tab.

Despite an unemployment rate of 9.1 percent in May, nearly three million job openings went unfilled — up from roughly 2.1 million when the recession ended in June 2009. To be sure, that's not nearly enough jobs for the roughly 15 million Americans who are out of work.

But many of those positions remain unfilled because employers can't find qualified candidates to do the work. From manufacturing to health care, employers report that they can no longer rely on hiring entry level workers and training them on the job.

“In the '60s and '70s you could go from an entry level job on the loading dock to manufacturing engineer or accountant to maybe a manager in a corner office,” said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. “It doesn’t work that way anymore. The qualifications have gone up. The commitment between employer and employee has gone down. And (employers) don’t want to take five years to get you ready. They want you ready to start working — and learning — the day you walk in the door. “

Employers aren't stingy about adding and updating skills for existing workers. Carnevale estimates American companies spend some $130 billion on training costs.

"But they don’t want to do qualifying training," he said.

Darlene Miller, CEO of Permac Industries in South Burnsville, Minn., said the days are long gone when a new hire could learn how to operate machinery on the job. Miller said she would add another half-dozen workers to her payroll of 38 workers — if she could find people skilled at operating the high-tech equipment she recently purchased to boost productivity.

"We just can't afford to take the time and the money to hire and someone to just shadow someone else and learn hands-on," she said. "The equipment is just too high-tech to do that."

Miller is a member of President Barack Obama's Council on Jobs and Competitiveness, which recently announced a goal of turning out an additional 10,000 American engineers annually by leaning on the private sector to boost university funding, add internships and create other incentives.

"These are the jobs of the future. These are the jobs that China and India are cranking out," Obama said in a visit to a Durham, N.C., lighting factory last week. "And we’re falling behind in the very fields we know are going to be our future."

For more than 14 million job seekers, local community colleges filling some of the skills gap: over the past two years, enrollments are up 15 percent. But those roughly 1,200 schools are heavily reliant on declining state and federal funding, which have forced some schools to cut back on course offerings, according to Christopher Mullin, a policy analyst at the American Association of Community Colleges.

"State funding continues to be cut and federal funding continues to be under strain," he said.

Miller says budget pressures at community and technical colleges also have restricted investment in the latest equipment and technology needed to teach students the latest skills.

"A lot of the schools do not have the equipment that we have — they can't afford to buy it," she said. "They have the drill presses, they have the engine lathes, they have archaic 1940s equipment. So the students have no clue what the real world is really doing out there."

Community colleges and students also face a looming funding squeeze set off by negotiations over cutting the federal budget deficit. Republicans have proposed cuts in the $34 billion Pell grant program, one of the biggest sources of tuition assistance for some 9 million students, more than 80 percent of whom have incomes under $30,000.

State funding is also being cut for four-year public colleges, where the career benefits of a bachelor's degree are substantial. While the overall unemployment rate is 9.1 percent, the jobless rate for four-year college graduates is about half that level. College graduates earn an average of $1,150 a week — nearly twice as much as a worker with just a high school diploma.

But even among college grads, there is a widening gap in the wage and employment prospects for various fields of study.

"We've got too many Americans taking guaranteed loans and going to college and majoring in philosophy or sociology and graduating (with) $100,000 in debt yet with no real marketable skills," said Peter Schiff, head of Euro Pacific Capital, an investment firm.

Among the college class of 2011, engineering dominates the list of top-paid majors, according to results of a new survey conducted by the National Association of Colleges and Employers. But of 1.6 million bachelor's degrees awarded in 2009, fewer than 90,000 were in engineering.

In some fields, the skills shortage is getting worse. The aging baby boomer population is rapidly increasing demand for nurse practitioners, but the supply of skilled workers isn't keeping pace. There are currently four job openings for every qualified nurse practitioner in the U.S., according to

In the end, someone has to pick up the cost of the skills shortage. The mismatch has forced employers like Lifespan, a chain of five Rhode Island hospitals, to come up with its own solutions. The company currently has about 450 job openings; 86 of those are hard-to-fill skilled nursing jobs, according to Brandon Melton, Lifespan's head of human resources.

"The way we fill that gap is with overtime and by paying for contract laborers, about 45 nurses that we import from other parts of the country for a few months at a time," he said.

The nursing shortage is hitting Lifespan's bottom line by more than doubling the salaries of those contract workers and adding to overtime. So the company has begun training from within, sending hundreds of its existing employees back to school and paying their tuition. The $350,000 cost of tuition reimbursements represents just a tiny fraction of the $850 million the company spends on labor costs.

"We can either continue to fill that gap at double time or we can invest in our own employees," said Melton.