Companies will feel ever more pain as the shortage of technically skilled workers intensifies.
David McCann, CFO Magazine
March 1, 2011
I agree with Prof Peter Cappelli's statement, "Many people don't understand that labor markets are like other markets: they adjust." I would add that businesses also fail to understand that this "adjustment" can take 5-10 years to materialize. Many technical occupations require 4+ years of education and a long internship. As a result, the supply of technically skilled workers is not "on demand", there must be a steady supply of technology jobs available if we are to maintain the supply of qualified workers. In the past, the supply of scientists and engineers was fortified by government spending on the military, the space program, and other national projects. Now, military spending is constrained and the space program is dormant. The folks in Washington seem to be consumed with the idea of cutting government spending, so the private sector had better figure out a way to invest in future technical workers. It's clear that the federal government is stepping away from that role. The solution is not to get your "fix" by clamouring for more H1B visas or sending jobs to India. What is the private sector doing to solve the problem? First, they've decided that the domestic workforce is too expensive to train and retain. After paying shareholders and executive compensation, there's not much left for workers. Some years ago, companies decided that greed trumps loyalty, so now it seems foolish to invest in training someone who might take their training with them to a competitor. Most large companies can obtain workers "off the shelf" from outsourcing companies in Asia. For just a few billion dollars in capital (that comes with a nice write off), a company can get a fully trained workforce ready (somewhat) to take over from American workers at a much lower cost. The US tax code and accepted accounting practices put the investment in the domestic workforce in one place on the P/L statement and the investment in an off-shore workforce in another place. Guess which one has more favorable tax consequences? Fundamentally, the problem is expecting something for nothing. Expecting a capable skilled workforce while the only real investment money is going off shore.
Posted by Ed Servello | May 16, 2011 12:33 pm
In my opinion, the "technical-skills gap" is a spurious description of a self-inflicted injury perpetrated by the American business community. The following comments are based on the text of the article, "To the 'Three R's' Add One More: Writhing". The article asserts that "businesses" are suffering from a skilled labor shortage and that they're worried about the future if the trend continues. I'm assuming that the distressed businesses are not the small ones that account for 75% of GDP. These are companies that expect to lose $50M-$100M as a result of the skilled labor shortage and include companies with revenues in excess of $1B. From this, I also assume that some are multinational and have off-shore offices and employees. Businesses seem to have a choice between curtailing operations or engaging in expensive strategies like overtime, higher wages, and hiring consultants. I don't get it. These "expensive strategies" seem like the ordinary things businesses do to cope with variations in labor and business volume. If a business experiences a short-term increase in need for labor, isn't allowing overtime or hiring a consultant the most cost effective way to address that need? Why should the supply of technical workers grow in the absence of attractive wages? For now, it seems other less skilled occupations are more desirable to the workforce. The statement, "A recent study by the Organization for Economic Cooperation and Development found that fewer than 10% of American teens plan to pursue skilled-trade careers." is not on-topic. Skilled trades careers are what we normally refer to as Blue Collar jobs (automotive technician, carpenter, electrician, HVAC, plumber, pipe fitter, welder, etc.). This is not the same category of jobs that the article is based on (Information Technologist, researcher, engineer, geophysicist, etc.). Apparently the unspecified mid-western state was confused about this too when they expected to hire a welder who could read technical blueprints. I suspect that no school or university has an engineering/welding program at this time. The article cites data from the Bureau of Labor Statistics. Seasonally adjusted job openings increased 45% between October 2009 and October 2010 but the number of actual hires rose by only 11%. Were these new job openings well distributed, or were they concentrated in some high-growth geographical areas? If a company opens a new facility and creates 500 jobs in a community with 200 qualified and available workers, the occupancy rate is going to be low. No surprise there. The characterization of young people as semi-illiterate Tweeters is also unfair. The lack of interest in science and engineering is more likely a result of lackluster secondary education. America's youth is not going to be attracted to a career in science and engineering if the learning curve is steep and the classes put them to sleep. Few of the nation's science teachers are certified to teach science and schools are so focused on literacy since NCLB that science programs have been largely neglected. The business community needs to form partnerships with public schools and colleges/universities to plan a curriculum that will capture the students' interest and ensure that the skills they're acquiring will be relevant 10 years down the road. (CONT next comment)
Posted by Ed Servello | May 16, 2011 12:32 pm
Technically skilled workers are extremely important for every organization of the world specially companies in tech industry, software industry, pharma industry, manufacturing industry etc... I think having high physical tech people is a key to success AND training to new and existing employees can help solve this problem easily. Nabeel Shaukat Content manager for Virtual Data Room Data Room Globalkap Corporation
Posted by Cameron Nabeel | March 24, 2011 02:57 pm© CFO Publishing Corporation 2009. All rights reserved.