The Key to Economic Growth: Fixing the Skills Gap

November 4, 2018 Updated: November 5, 2018

WASHINGTON—U.S. job openings surged to record high levels this year, and for the first time in many years, available jobs exceeded the number of unemployed people, with companies struggling to find workers with the talents they need.

Businesses across the United States are suffering from a talent shortage, and the problem is growing. As of the end of August, there were 7.1 million unfilled jobs, an 18 percent increase in the last year. Meanwhile, 6.1 million unemployed Americans are looking for jobs, and the labor force participation rate lingers at 63 percent.

Workforce participation is one of the biggest issues that the nation faces over the next few years, according to Christopher Liddell, assistant to the president and deputy chief of staff for policy coordination.

“We need people to fulfill the jobs and we need the people with the right skills to fulfill those jobs,” he said at a conference hosted by U.S. Chamber of Commerce (USCC) on Oct. 30.

Growth in the labor force is one of two key factors of high and sustainable economic growth. For more than five decades, a growing labor force provided a sizable boost to economic expansion, thanks to the emergence of the baby boom generation and the entry of women into the workforce.

Since the turn of the century, however, workforce participation has steadily declined from just above 67 percent to a low of below 63 percent. The recent decline has been concerning to many economists and policymakers who recognize the strong link between labor force participation and economic growth.

Productivity growth and workforce participation are key to keeping the economy growing, Liddell said, adding that deregulation and tax reform have already helped drive greater productivity in the country in the last 18 months.

But workforce participation has now started to become a key focus, he said.

White House Initiatives

President Donald Trump signed an executive order in July to create the National Council for the American Worker, which is tasked with developing a strategy to fix the skills gap problem in the country.

The council, made up of top government officials, works with the private sector and local governments to expand vocational education, technical, and on-the-job training for students and mid-to-late career workers.

More than 100 U.S. companies and organizations said they would support the workforce initiative, by pledging to train more than 6 million workers and students for new jobs and new skills.

USCC also launched several initiatives in the last few years to address the nation’s pressing workforce challenges. USCC’s Talent Pipeline Management initiative, for example, aims to connect classrooms to jobs so that the workforce can meet the rapidly changing industry requirements.

In addition, T3 Innovation Network and Job Data Exchange initiatives leverage technology and data to better align students and workforce with the needs of emerging jobs.

Amid a strengthening labor market, there are two gaps that create insecurity for many businesses and workers, according to Thomas Donohue, president and CEO of USCC.

“The first is a skills gap—too many people lack the skills or credentials they need to compete for 21st-century jobs,” he said at the USCC conference.

“The second is a people gap—too many businesses can’t find the workers they need, when and where they need them. Closing both gaps is imperative to our competitiveness.”

Skills Gap in the IT Sector

The United States has historically been ahead of other countries in employing cutting-edge technologies. The country is the greatest innovator but it no longer has the workforce to service its digital economy, warns Allen Shaheen, executive vice president at Cognizant, an Information Technology (IT) service company.

“There are 600,000 open computer science positions across the country today,” he said at the conference.

“If you take a look at the supply side, each year we graduate about 50,000 people from computer science programs in the United States.”

He added that India and China each graduate about 200,000 in similar programs.

In order to bridge the gap, Cognizant has formed partnerships with community colleges across the country. In addition, it has launched pre-employment program for mid-career professionals that are outside of IT sector. The company also took $100 million from its corporate tax windfall thanks to tax reform and created a nonprofit organization to train communities that are underrepresented in IT such as women, minorities, and veterans.

Building awareness among all the players in the workforce system is the key to success, says Tracey Bryan, CEO of The Bridge of Southern New Mexico, a nonprofit organization supporting workforce development.

“Our young people don’t know how to take advantage of the opportunities that may be right there in their community,” Bryan said.

If all these efforts help create a common language among educators, employers, and workers that would be a huge step, she said.

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