Feature                                                   Pages 38-40


The Skills Gap Myth 

Why blame the schools when businesses’ own behavior in hiring and training are the main culprits?


Virtually everywhere we turn now, both in the news media and in public policy forums, discussions are taking place about what to do to solve the skills gap problem. If you have a curious mind, you’d ask, “What is the skills gap?” The pundits answer this way: Employers can’t find people to do the jobs they’ve got available.

That sounds surprising. How can that be with all these people looking for jobs at the moment?

 Peter Cappelli
Peter Cappelli, a professor of management, believes public schools are wrongly faulted for what businesses consider lagging skills in the workplace.

The pundits say this is the case because jobs now require a lot more skill than they did before. And, they usually contend, our schools are failing, so graduates don’t have those new skills.

Probing Questions
Daniel Kahneman’s new book, Thinking, Fast and Slow, describes how the fast type of thinking, which is how we make snap judgments, takes over in situations like those above. We’ve been hearing for some time that employers can’t find what they want and that the public schools aren’t delivering what’s needed. Both sound familiar, so they must be true. There seems to be a lot of technology in use in the workplace today, so that sounds right, as well. So we buy the story.

What if, instead, we engaged in what Kahneman, a behavioral economist and Nobel Prize laureate, would describe as the slow type of thinking, which is where we apply the tool of reason? We might ask a few probing questions.

If the problem is that schools are failing to prepare graduates for the available positions, how would that explain all of those experienced people who can’t get jobs? They graduated decades ago. If we remembered anything from our entry-level classes in economics — where prices rise to even out shortages — we might ask why that isn’t happening in the labor market. In fact, wages have been falling.

If we consulted the evidence, we’d ask even more difficult questions, and when we did, we’d find no evidence for any part of the familiar skills gap story.

Start with the notion that schools are failing. We know from the “Nation at Risk” report, still widely cited 30 years after its release, that student performance, notably at the high school level, had declined considerably. That was true in the 1970s when many of the pundits complaining now about poor student achievement themselves graduated from high school.

Since then, and especially from the 1990s through today, student dropout rates have fallen sharply. Objective assessments, such as the National Assessment of Educational Progress, show consistent improvements in reading and math scores, especially among traditionally disadvantaged student groups. It may well be true that students are not achieving enough and that the performance in some schools is masked within the averages and the schools are truly in crisis, but that is not the same thing as the sweeping conclusion that all schools are failing and they are getting worse.

Workplace Behaviors
More important, when we look at what hiring managers say about applicants just graduating from school, they are not complaining about academic deficiencies. Their complaints focus on personal attitudes, such as dependability and self-reliance, the same things they’ve complained about for decades.

How about the idea that jobs today require so much more skill than in the past? A 2008 National Academy of Sciences report “Research on Future Skill Demands,” looked into this and saw no real evidence for that claim. While job growth for positions requiring a college education is slightly higher than for those that do not require a college degree, there are so many more of the latter jobs now. (See chart above.)

To see that technology may be becoming ever more sophisticated even though the skills required to use it don’t have to be great, consider your cellphone. It’s a wonder of complex technology, but if all you want to do is call home, you can do that simply by pressing a button.

We then should consider what is going on with the main claim that continues to drive the skills gap story, that employers cannot find people to fill their vacancies. Is it even true?

While there are vacancies that are not being filled, that is true in every economy because it takes awhile to search for candidates and sort through the applicants before hiring. Yes, it takes longer to hire now, but that is typical after every recession, in part because so many applicants must be sorted through and considered.

What jobs are difficult to fill? Here the evidence is almost all anecdotal, but jobs that are truly entry level are extremely rare. The jobs hard to fill overwhelmingly seem to be those where the requirements include extensive prior experience.

How about those employers who say that they cannot find what they need among job candidates? What could be going on there? One simple explanation is they aren’t paying enough. We’ve probably all seen the TV shows where new homebuyers go out to look for a new house, and they always are shocked to discover they cannot get what they wanted at the price they want to pay. The real estate agent never concludes the problem is a housing shortage. The buyers have to learn either to pay more or expect less.

Is that happening with employers? It does not appear to be. The best-organized complaints about skills gaps come from manufacturers and for jobs associated with machinist skills. Yet the pay for those positions has dropped 20 percent in real terms over the past 20 years, while skill requirements for many of those jobs have indeed risen. No doubt it is true employers are squeezed hard on costs these days, but suspending the laws of supply and demand is something that public policy cannot do for them.

Gutted Training
I thought getting the talent a firm needs to run an operation was a basic business problem, something that happens through hiring but also through training and development. What are employers doing to address this business problem?

The evidence again is not very robust here, but it appears that training programs largely have been gutted over the years. Apprenticeship programs have disappeared for the most part. Human resources departments, the places where they do recruiting and training, also have been shaved down. We have evidence that recruiting expenditures have fallen sharply and that turning recruiting over to computers through automated hiring software doesn’t work very well. The anecdotal evidence suggests employers are expecting more and more from job applicants. No unemployed need apply, as only those currently doing the same job elsewhere will be considered. This is in addition to the evidence that wages are continuing to slide.

My review of the skills gap story sounds like this: Employers are complaining about not being able to find the applicants they want to hire. But this cannot be, at least at the level of the nation’s economy, because schools are failing. Student achievement in the United States actually has been rising since the early 1980s. Nor could it be because skill requirements are rising, as they change very slowly and, at the level of the economy, are barely budging.

When we look inside at what employers are doing, on the other hand, they seem to be asking for more, paying less and cutting back on recruiting and training. Would that make it difficult to find the people one wants? You bet.

Peter Cappelli is the George W. Taylor professor of management at the Wharton School and director of its Center for Human Resources. He adapted this article from his book Why Good People Can’t Get Jobs. E-mail: cappelli@wharton.upenn.edu 


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