The Great Skills Mismatch
Despite persistently high unemployment numbers, companies are struggling to find engineers and skilled laborers. What’s behind this gap—and what can today’s CEOs do to find the talent they need?
February 26 2013 by William J. Holstein
The Great Skills Mismatch Sidebars
Brian Pelke, 38, owner and president of family-held Kay Manufacturing on the gritty southeast side of Chicago, near the faded steel town of Gary, Indiana, takes the nation’s shortage of skilled workers very seriously and quite personally. As head of a $25 million-a-year maker of components for the U.S. auto industry, he watched as Detroit’s Big Three and their top suppliers became bloated and uncompetitive, only then to suffer through crippling bankruptcies and restructurings. While that painful process dragged out over decades, hundreds of thousands of jobs were lost, either to Asia or to Mexico. High schools and community colleges in Pelke’s area stopped teaching kids how to work in manufacturing—because there were no jobs.
Now that Detroit has stripped down its cost structure and car sales are showing surprising strength, automakers are demanding more parts from Kay Manufacturing. Pelke’s employment stands at 125 people, and he is trying to hire 10 workers a month to meet demand for his highly machined products. “We need people in all areas, but it’s tough to find them,” he explains. As someone who started working at his father’s plant at age 14 and was by no means a star in high school, he’s now reaching out to high schools and community colleges to find workers. “I was one of those kids who wasn’t the best kid in high school and was discarded by my guidance counselor,” says Pelke. “I want to tell the young people out there today that there is a great opportunity for them. I tell them they can make $50,000 to $100,000 a year taking care of these machines.”
Pelke’s challenge is a microcosm of a national skills mismatch. Employers report that they have three million job openings and cannot find applicants with the right skills at the right cost—even though 23 million Americans are unemployed or underemployed. CEOs face shortages of engineers and skilled laborers, such as welders, operators of computer-controlled machines and chemical process operators as the American manufacturing model continues to shift away from the traditional assembly line to a leaner model that requires more team-orientation, cross-training and higher reasoning skills. Thus, the skills mismatch is a triple-headed monster. Not only does the nation face the challenge of creating new pools of qualified, young labor entering the work force, it must retrain workers in their 40s and 50s who have been displaced from other jobs but lack necessary skills. At the same time, millions of existing workers have to obtain new skills to keep their companies competitive, a process known as upskilling.
Large companies, such as Ford Motor, IBM and Intel, have the scale and human resource staffs to address the skills crunch and have been doing so for years, but small and medium-sized enterprises (SME) across the country also are increasingly finding that they must engage with community colleges to address the gap. Although there is no central clearinghouse of information about business tie-ups with schools, it appears that there has been a burst of such activity in the past year to 18 months. It’s still too early to tell whether the collaborations between SME CEOs and community colleges will make a significant dent in the skills mismatch, but the early signs are promising.
CEOs interviewed in four industrial states are finding that community colleges are more flexible than four-year universities because they allow business leaders to review their curricula each semester and suggest changes to make the coursework more relevant. Community colleges will provide on-site training, as well as training in a company’s own facilities on evenings and weekends. They usually offer coursework that leads to certificates within six to nine months—in sharp contrast with private, for-profit universities and technical centers that often require two full years of instruction. For-profit colleges also have come under fire for not networking with employers to adequately understand their needs and produce students with the right qualifications. Furthermore, community college certificates cost a fraction of a for-profit college education. An added plus: because there are so many of these schools (some 1,200 belong to the American Association of Community Colleges), they tend to be located nearby, so it is easy to hire from their ranks and not face the expense of relocating workers from elsewhere.