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Closing the Skills Gap

eye on the news

Closing the Skills Gap

America must get serious about worker training—and retraining—to stay competitive. July 31, 2018
Economy, finance, and budgets

According to the Department of Labor, more than 6.5 million jobs remain unfilled because employers can’t find workers with the necessary skills. Some of this shortfall may reflect the fact that U.S. unemployment rate is historically low, but much of it stems from inadequate worker training. The problem shows up clearly in the widening wage gap for skilled work, which extends beyond the well-documented distinction between the earnings of the college-educated and those with only a high school diploma or less. Across the spectrum of work, the premium for skill continues to grow.

As the baby boomers retire, many skilled workers will leave the productive economy. Just to sustain existing levels of productivity, their replacements will need to rise to their predecessors’ skill level quickly. Global competition will continue to exert pressure, regardless of President Trump’s tariffs. Low wages in emerging economies have drawn manufacturing of simpler, low-value-added products offshore, leaving our high-wage economy with little choice but to turn to more complex, high-value-added products, which demand a better-trained workforce. Rapid technological progress will make its own demands for skilled labor: nearly one in five of today’s jobs did not exist in 1980. More recently, artificial intelligence has threatened to replace less-skilled workers—and even some higher-skilled ones—through automation. American workers will need to upgrade their skills continuously to stay ahead of these economic pressures.

Washington has been slow to respond until now. The Trump White House has supported the expansion of apprenticeship programs and is now pressing legislation to increase access to technical education, most notably through the Perkins Career and Technical Education bill. Executive orders aim to expand training, which the White House refers to as “workforce development.” Adding to such ad hoc efforts, the administration has promised to develop a concerted strategy for “training and retraining” workers for “high-demand industries.”

A recent report by the Council of Economic Advisors lays out the difficulties in meeting the training challenge. Though all interested parties—individuals, employers, government entities, even social-welfare organizations—have strong incentives to train more workers, each group also faces impediments to success. Few individuals can afford to pay the costs or take the necessary time away from work for retraining. Nor is it clear which training or which credential fits the work on offer. Employers, fearful that workers will take their newly acquired skills to competitors, are reluctant to contribute to outside training programs. Government and nonprofits devoted to workforce development are struggling to identify the best ways to get workers trained in a timely fashion.

Many positions with similar names require quite different skill sets, confusing individuals seeking training or retraining and complicating curriculum development at community colleges and technical schools. Another problem with an asymmetrical labor market is that Americans are less willing now than in the past to relocate for jobs. The Census Bureau notes that the percentage of residents who have moved within the last 12 months has fallen by more than half in the last 30 years, to barely over 10 percent. Making matters still more fraught is the dynamic nature of today’s high-tech economy. Credentialing workers for job functions that have existed for only a few years is challenging, as is determining certification equivalencies; even if everyone agreed on standardized credentials tied to specific functions, the rapid evolution of the workplace would render such standards obsolete before long.

Apprenticeships answer many of these difficulties. For workers, they offer pay while learning a needed trade. The companies running the programs can tailor them to fit their own needs. Employers are rightly concerned that their newly minted apprentices may take their skills elsewhere; some have proposed mandating that workers stay with a firm for a certain number of years, or that firms receive compensation if a worker leaves early, but such arrangements are hard to enforce and even harder to implement. Meanwhile, apprentice programs, though often successful for the young, have shown mixed results for older workers. Even in Germany, which has enjoyed great success with its apprentice programs for the young, older workers seeking to retool their skills have fared less well.

A viable alternative for the United States: apprentice-like programs structured as partnerships between community colleges, technical schools, and employers. In these arrangements, the school acts on behalf of students to secure apprenticeships, sometimes referred to as “internships,” with local employers. Many corporate participants have roots in foreign countries, where management, especially the Germans and Japanese, are familiar with apprentice programs. But American employers have also participated. The income these “apprentice interns” earn helps defray the cost of tuition and ameliorates individual concerns about foregone income while training. Several nonprofits involved in these efforts have offered support and leverage to expand these programs.

The pace of technological development will increasingly require workers to retool their skills multiple times during their careers. Efforts to tie retraining to unemployment insurance, as Germany now does, have foundered. Federal funding, largely through Pell grants, often excludes those who have too much education—or too little. Pell grants also fail to address worker concerns over lost income while learning. The Labor Department’s Trade Adjustment Assistance program offers help in this regard, but on a smaller scale than needed, not least because restrictions on eligibility limit participation only to those who have lost their jobs to import competition, or because their jobs were shipped overseas.

What data exist about the efficacy of these programs make clear that company-based efforts—whether apprenticeships, internships, or internal training for established employers—have the best track records. The training connects logically to a future job, motivating enrollees to concentrate and finish the program. Though these programs offer no help to displaced workers or those just entering the workplace, they could be used as a model for programs to help these groups. Many government and some nonprofit efforts lack a specific job focus, and consequently teach general skills, less compelling to the eager trainee. Such programs experience high dropout rates. Also, the practice of mixing disadvantaged youth with displaced workers in the same program—as happens often in government and some nonprofit efforts—ignores the very different needs and backgrounds of these groups and winds up serving neither very well. Surely greater communication with industry and more flexibility can remedy these failings.

Getting American workers the training they need will require a long-term commitment from many quarters. It will demand experimentation to find out what works with which groups and in which regions, and it will necessitate some trial-and-error. That’s why recent moves in Washington are welcome. Until recently, Washington has hardly paid attention to the problem of skills training, and the federal government, under Presidents Bush and Obama, focused almost exclusively on funding for higher education rather than training. Washington is not responsible for the entirety of the current situation, but the federal government sets the tone. Time will tell whether the Trump administration’s recent push will continue and expand, as it should, but it is already a welcome break from an ineffectual past.

Photo: CasarsaGuru/iStock

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