Ask large companies today whether they are facing a skills crisis and the answer is likely to be yes. According to a survey by consultants McKinsey earlier this year, 87 per cent of firms worldwide said they are doing so at the moment or expect to in the next few years. A mere 6 per cent said they didn't have a problem at all.
What does a skills shortage mean exactly? For businesses this is something that reaches into every corner of the economy. Most people will likely have seen the shops, hotels and restaurants that have been unable to open fully after the Covid pandemic because they simply don't have the trained staff. In some cities like London there is all-out war between high-end restaurants for the services of the best chefs and sommeliers, with staff being offered pay rises of 25 per cent and more just to switch jobs.
Economy-wide shortages
But the problem goes much deeper, as evidenced by the number of unfilled jobs across the developed world. For example, right now there are nearly 11 million job vacancies in the US and over a million jobs waiting for workers in the UK, which are quite extraordinary numbers for economies that have only just emerged from recession. Not all of those jobs are unfilled due to skills shortages, but very many of them are.
The crisis cuts right across the economy, with engineering and manufacturing, financial services and healthcare all affected by skills shortages according to research by the UK recruitment agency Search. And in all sectors digital technology skills are the most sought-after.
For example, the 10 most in-demand skills in Forbes magazine's recent ranking were all technology related. They included machine learning and artificial intelligence, Internet-of-Things technologies, cybersecurity and cloud applications, and data management.
Creating the new skilled workforce
The next question is where those skills will come from if they are not available in the labour market today. This kind of expertise doesn't grow on trees. If you want skills, someone has to invest – but investment in training has long been a weak link in many developed economies.
A few years ago, the internet platform company IBM carried out a wide-ranging review looking at the growing skills gap and attitudes to training. It worked with the consultancy Oxford Economics to survey over 5,000 senior executives in companies, governments and higher education institutions and ask them what skills the global economy needs now – and in the future – and how to create them.
Almost 80 per cent of those surveyed thought the main responsibility for addressing skills shortages lay with government. Next in line came higher education institutions. Businesses themselves ranked only third.
Maybe this is where things are going wrong. Businesses have long assumed that the way to get the skills they need is to hire new people – and that new people will always be available. But as we have seen, this is not the case today – and it may not be in future. Employers need a new approach, not least because it could make financial sense.
Upskilling is the future
It certainly makes financial sense to concentrate on reskilling existing workers instead of hiring new ones when the cost of reskilling is so much lower. According to the Work Institute, a private consultancy, the average cost of going through the hiring process is about one-third of salary, which could easily mean $20,000 plus. Yet the average cost of reskilling for transition to a new job has been estimated at less than half that. It is cheaper to create skills than to buy them.
It is also better for morale. Numerous job retention surveys from the likes of consultancies McKinsey and PwC have shown that a sense of being valued – and worth the investment that upskilling requires – is more powerful even than financial rewards in limiting costly staff turnover.
The good news is that creating new skills in existing workers is easier and cheaper than ever before. Online learning (sometimes called virtual training) and incremental skill acquisition (or microlearning) while continuing to work are all increasingly available, and employ the same communication networks and devices that companies and individuals already use every day.
In fact, the upskilling infrastructure is already in place. The only thing stopping it from working is the ‘hire first' mindset that many companies still cling to.
It's clearly time to change that mindset.
