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U.S. Employers Say They Can’t Find Skilled Workers
Should they be training their own? And why did they stop in the first place?
For several years now, the U.S. job market has been booming. And for even longer, companies have had the same complaint: They can’t find enough skilled workers. Businesses across a wide swath of industries, particularly trucking, restaurants, health care, and tech, report problems finding people with enough know-how to do the work.
This policy area has been a focus of the administration for years now. In 2018, the president signed an executive order, tasking a new “Council for the American Worker” with improving the federal government’s patchwork of job training programs and expanding apprenticeship and midcareer training programs. Yet, despite the administration’s attention, employers continue to struggle. A recent survey from the National Federation of Independent Businesses found that 35% of small business owners had job openings they were unable to fill in August, and 89% of those hiring reported having “few or no qualified applicants” for their open positions. More than a quarter of small business owners surveyed said finding qualified workers was their most important business problem.
This raises an interesting question: Why are so few businesses providing the job training required to create the skilled workers they need? While the data on employer-provided training is, in the words of one researcher, “terrible,” the existing evidence suggests companies have backed off the kind of training many provided in earlier eras. A paper published in 2015 by C. Jeffrey Waddoups, an economics professor at the University of Nevada, Las Vegas, found a 28% decline in the number of workers who got training from their employers between 2001 and 2009. Those numbers were down across most industries, occupations, and demographic groups.
Two other major changes in the U.S. economy are likely also to blame here: the decimation of American unions and the “fissuring” of the American workforce.
As Robert Lerman, a fellow at the Urban Institute and an expert on apprenticeship and workforce training, laid out in a paper for the National Academy of Sciences, companies essentially have two choices when they need an employee with a certain set of skills. They can “buy” one (pay up for a worker who already has the skills in question), or they can “make” one (provide and subsidize the necessary training for an existing employee).
Both “make” and “buy” strategies come at their own costs. Training workers costs money. No company wants to make an investment that won’t pay off. If companies believe that their employees may bolt, or if they don’t have confidence that their existing employees can learn, they’ll be reluctant to make those investments in workers. A tech company, for example, may not be willing to spend thousands of dollars training an existing employee to use a new programming language if they believe the employee might take a job with a competitor shortly after completing their training.
Even back when employer-provided training was more common, employers were reluctant to invest in training low-skill, entry-level employees, who typically have shorter tenures than managerial employees. “Employers don’t want to invest in someone who might disappear tomorrow, and those workers have higher turnover,” says Harry Holzer, a professor of public policy at Georgetown University. “Employers might also have more confidence in professional employees’ abilities.”
While these dynamics have been around for a while, several recent trends have likely changed the calculus of the “make” or “buy” decision. For starters, the manufacturing industry used to be a bastion of on-the-job training — that industry’s decline is a major contributor to the dearth of job training. At the same time, growing industries like health care and technology may be less suited to employer-provided, on-the-job training, since acquiring the needed skills involves a much larger investment of time and resources. “If your skilled needs are rising, it makes sense to provide the skills externally rather than internally,” Holzer says. “If your workers need a set of quite technical skills, it’s too much to learn on the job.”
But two other major changes in the U.S. economy are likely also to blame here: the decimation of American unions and the “fissuring” of the American workforce. Unions used to (and still do, in smaller numbers) work with employers to provide training that was relevant and useful. Unions in other parts of the world still fill this role in a meaningful way. In Sweden, for example, industry-union partnerships effectively retrain displaced workers so they can transition relatively quickly to new jobs.
If no one — neither companies nor employees — is willing or able to invest in training, businesses will likely continue to face shortages of qualified workers.
Then there’s “the fissured workplace,” a term introduced by David Weil, a professor at Brandeis University in Massachusetts, to describe the trend of contracting out business functions that used to be performed in-house. In a world where companies now outsource everything from janitorial services to human resources, businesses are less likely to invest in training workers to take on other roles. In other words, companies are no longer training their mailroom employees to do more advanced jobs, because the workers in the mailroom are employed at another firm.
The solutions to this problem are complicated. If no one — neither companies nor employees — is willing or able to invest in training, businesses will likely continue to face shortages of qualified workers. At the same time, few think employers should be exclusively responsible for training workers. Some economists recommend increasing federal funding for training providers, like community colleges, and incentivizing them to provide the type of training employers want. They also propose tax credits to motivate companies to invest in workers and partner with training providers — as well as tweaks to financial aid programs to make it easier for midcareer workers to upgrade their credentials.
These sorts of training partnerships between employers, providers, and the federal government also offer some important protections for workers: namely that their skills will be applicable to more than just one company. On that note, Holzer raised concerns about one of the Trump administration’s flagship efforts to address skilled worker shortages: its new Industry-Recognized Apprenticeship Program, which would allow businesses to create apprenticeships that are subject to much weaker oversight and regulation than registered apprenticeships.
Whether the correct answer for a given company or industry is to “make” or “buy” their skilled workers, programs producing sloppily or inadequately trained workers will do little to alleviate the long-term problem.