For much of the last 10 years, employers have enjoyed a relative abundance of talent across most job functions. The Great Recession’s layoffs, consolidations, restructuring, and offshoring meant that there were more workers in the US than job vacancies. Yes, it continued to be tough to find skilled workers such as maintenance technicians, engineers, and nurses, but most companies were able to have their choice of candidates from a pool of talent hungry for work.
Not so, any longer. The employer’s market has given way to a talent shortage that affects companies across industries and regions. As of April 2018, US unemployment dipped to 3.9%, a 17-year low, and the Bureau of Labor Statistics (BLS) cited 6.47 million job vacancies, higher than the 6.35 million the agency reported as unemployed.
For CEOs, finding and keeping great talent could get a lot harder. Just when the US economic engine needs new workers to grow, the early years of Baby Boomer retirements are upon us, causing an aging workforce issue that is forcing many companies to scramble for the next generation of leaders.
Additionally, companies cannot find sufficient numbers of workers with the right skills and qualifications for the jobs they are creating in advanced fields. For companies seeking workers engaged in science, technology, engineering, or math (STEM), the situation is dire: while the US is growing its number of technology capable workers, the increasing need for these skills will likely amplify the supply / demand imbalance for years to come. According to the Smithsonian Science Education Center, by the end of 2018, 2.4 million STEM positions in the US will go unfilled.
The talent supply pressures are exacerbated by shrinking immigration numbers. The American Immigration Council estimates that 20-25% of the US STEM workforce is composed of foreign-born workers. According to Axios and the US State Department, international students in the US dropped 17% in 2017, mostly due to declines in visas for students from India (down 28%) and China (down 24%). BLS estimates that by 2024, the US will have an additional 73,000 job openings in mathematical science and over 1,000,000 openings in computer occupations. Robotics and process automation will eventually help alleviate some of the imbalance, but most of the gains will likely be in transactional or repetitive work, with widespread adoption still years away.
While the national picture is worsening, not every region is experiencing the supply and demand imbalance equally. As companies open new locations in more favorable talent markets, workers are voting with their feet as well: BLS reports that the while the national average tenure for software engineers is just 35 months, it is lowest in the tech hubs of San Francisco (27 months) and Seattle (28 months).
When adjusting for cost of living, traditionally high paying markets become less economically viable. A Deloitte analysis found that cities such as San Francisco, New York and D.C. fall outside of the top 20 in salary rankings when adjusting for cost of living, while less expensive secondary markets, such as Dallas, Detroit, and Phoenix, move toward the top.
To navigate a talent market that is likely to tighten for years to come, CEOs must challenge their teams to identify the root causes of pain in the talent strategy: What positions and skills are difficult to find and retain, and why? How will our needs change in the next five years? CEOs must also ensure that the footprint is contributing to (and not inhibiting) the talent strategy.
By positioning the company in locations that provide sustainable, local pools of skills while also being a draw for national talent, CEOs can gain a strategic advantage over competitors who struggle with talent acquisition and retention.