The growing skills gap is making it harder and harder for recruiters to make hires. It can be difficult to find candidates who have the right skills for a job opening, especially in a labor market with an unemployment rate of 4.1 percent, the lowest it has been in more than 10 years.
How prevalent is the skills gap in general? What can employers do to address the skills gap? These are some of the questions addressed in the economics literature “Rethinking the skills gap,” which I have summarized here.
Under-Skilled or Over-Skilled?
Even though some employers face a shortage of relevant skills, some workers are over-skilled for their jobs. In OECD countries, 4 percent of workers are under-skilled for their jobs. Yet, more than twice as many, or 10 percent, are over-skilled. Therefore, skills mismatch is not only a recruiter problem, but can also be a problem for candidates who cannot locate jobs that make full use of their skills. This is an opportunity for employers to find and recruit people who are over-skilled in their current jobs.
What Causes Skills Mismatch?
Why is there a skills mismatch in the first place? We economists believe the market adjusts to bring about solutions that work out for everyone. So what are some of the failures to adjust that can cause the skills gap? One of them is that workers do not train or re-train for the skills needed in the market. The second possible reason for mismatch is that employers do not create the kinds of jobs that fit the skills workers have. Finally, a third possible reason is that employers do not adjust salaries to reflect the skills mismatch: You would expect salaries for jobs subject to skills mismatch to be higher. Insufficient salary adjustment is likely to be one of the most important reasons behind the mismatch.
So, what are some ways to close the skills gap and hire more efficiently?
Solution 1: Increase Your Salary
How can you attract scarce talent? We all know that increasing salaries can help. But how big is the effect? We used data from CareerBuilder to find out. In a study with my co-author Ronald Wolthoff, we find that job postings with higher salaries attract more and better candidates. For a given job title, a 10 percent higher salary attracts 7 percent more candidates. Furthermore, with a higher salary, candidates are more educated and more experienced on average. Use a labor market data tool to see how competitive your salary is, and consider paying somewhat above the market average if you have difficulty attracting qualified candidates.
Solution 2: Focus Recruitment Efforts on Recession graduates
Can you guess which employees are most likely to be under-placed? Research shows that students who graduate in a recession tend to get lower pay. In order to catch up, they have to switch employers multiple times in order to find a job that is a better fit for their talents. This implies that you should have an eye out for candidates who graduated in 2008-2009, since they are more likely to be under-placed. If they have the right skills and you make them an attractive offer, you may well lure them away from their current employer.
Solution 3: Offer In-House Training
If you cannot find employees with the right skills, consider hiring people with related skills and offering them training. Using semantic search, you can locate people with skills related to the skill you are seeking. This can be especially useful if the skill you are looking for is rare. An example of a rare skill would be a new skill in software development. Hiring people with a skill set close to the one you are looking for and offering some extra training can be an effective solution to close the skills gap.
Solution 4: Partner With Your Local Community College
What if you don’t have the resources to offer in-house training? In this case, you may consider reaching out to your local community colleges to see if they would be able to train for the skill you are looking for. Community colleges are eager to train students for skills that will increase their ability to find a job. Therefore, if they have enough employers asking for a specific skill set, they are likely to develop a degree or certificate that will train students for that skill.
In conclusion, the skills gap can be a serious problem for employers, but there are at least four solutions to overcome it. Employers can offer higher wages, focus their recruitment efforts on under-placed workers, offer in-house training to workers with relevant skills, or partner with community colleges to develop the skills they need. Today’s sophisticated search and recruitment tools can help employers to implement these strategies by providing up-to-date information on candidates and on market conditions.
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Ioana Marinescu is an economist. She is an assistant professor at the University of Pennsylvania School of Social Policy and Practice and a faculty research fellow at the National Bureau of Economic Research. Her research focuses on understanding labor markets. She has been collaborating on data and research projects with CareerBuilder and she is especially interested in how to get the right people to work in the right jobs. You can follow her on twitter @mioana and check out her research on her website, marinescu.eu.
