Discussing the Myth of The Skills Gap with Peter Cappelli

Posted by Ben Weiss on Fri, Jul 20, 2012 @ 09:07 AM

One of the most pressing topics of the last few years has been the "skills gap:" the idea that employers have positions open but cannot find candidates with the right skills to fill them. While some may blame this problem on an inability to keep up with emerging technologies or a failing education system, Peter Cappelli - professor at The Wharton School of The University of Pennsylvannia - tells a much different story in his recent book "Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It." In order to learn more, Cappelli was kind enough to sit down with Infusive Solutions for a few minutes to discuss impossible hiring standards, the disappearance of training programs and how no one has come up with a compelling counterargument. 

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Infusive Solutions (IS): How does the mainstream define the “skills gap” and when did you first starting seeing this phenomenon come to life?

Peter Cappelli (PC): These stories have been kicking around for a long time - about problems associated with the labor force that are causing employers headaches ... they have all been wrong frankly, so far. But, there are a lot of them. So at some point, people keep hearing all these stories and they start to think that there must be something to them. So I think where it started this time was of course during the Great Recession, and people started hearing these stories, and wondering what’s going on.

The mainstream view is the intersection of a couple of different arguments. One argument is that employers can’t find what they want and the other argument is that schools are failing - and the conclusion from those two arguments is that employers can’t find what they want because students don’t have adequate skills when they graduate because the schools are doing such a lousy job. So that’s the dominant view.

We know that’s not true - first, schools are not getting worse. In fact, student performance is going up and it’s been true for quite a while that the average American is more educated than the job they’re doing requires. There’s actually a whole line of research about the excess supply of people being over qualified, so I knew that part of the story wasn’t true. So you start asking yourself about the other parts. Like if you really have a shortage of some kind, you’d expect labor markets to get tight and you would expect wages to go up. But, that hasn’t been happening. So that suggests that something is wrong, because if wages are not going up, how can you have a tight labor market?

And then we know that employers are basically not paying very much, so if you are the least bit economically oriented, then you say ‘ok, they can’t find what they want, but they’re not willing to raise their prices (wages in this case) so gee, that’s not a surprise.’

The point is there is not a single part of that conventional wisdom is true. And it’s amazing how popular it is. But, it’s popular because first, the employer is off the hook. They can say it is nothing they’re doing wrong. In fact, I’m sure they’re right in saying that they are not getting the people they want … the skills gap story is just their diagnosis of why.

And they don’t have any particular expertise in assessing explanations for what’s going on, so it’s easy to say that it’s nothing that I’m doing wrong so it must be something else, and that’s got to be the labor force.

IS: I recently read your New York Times article challenging employers to evaluate their existing staff and determine if those individuals would still measure up to current hiring standards. With that in mind, do you think that hiring expectations have gotten out of control?

PC: Oh sure. You know it’s true if employers can’t hire - you have tons of people, who, a few years ago, were perfectly qualified to do the jobs that they were doing, and now they can’t get the same jobs. So how could that be?

It’s not that the technology has changed the jobs, it’s just that employers are expecting more, typically trying to combine two positions into one or finding somebody who can do both jobs, that’s part of it. The simpler story is that they don’t want to raise their wages. I always ask employers that one. They say they can’t find people and I ask, ‘well have you raised your wages?’ And they always say, ‘well, we’re paying enough already.’ Well, it’s not your call as to how much you have to pay. Markets dictate that. If I can’t buy a car at the price I want to pay, that doesn’t mean there’s a car shortage.

IS: Is this directly correlated to the recession? You mention this change has occurred over just a few years, so it seems like this landscape is somewhat recent.

PC:  I think it’s relatively new - it’s been underway for a while, and the thing that has changed, frankly, is that employers no longer expect to train anybody. They are expecting everybody that they hire to contribute immediately. But, then you come to the problem of how can you be sure if someone could contribute immediately?

Well, they say the best way to know that is if [that candidate] has done the same job already and you say, okay, well you’ve done the same job already, you’re qualified, but we want you to have had the same job recently. Also, we don’t want you to have been laid off because we are afraid then that you must be rusty or got laid off because you weren’t very good ... and I don’t blame them [employers] for trying to reduce the uncertainty, but there are consequences to that - the obvious consequence being that if you’re hiring requirements are that somebody needs to be currently doing the same job at one of your competitors, then you are shrinking down the supply of labor to a ridiculous level - you are creating, in essence, an artificial shortage.

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The only people you will look at are those who are currently employed - you don’t want anyone who’s unemployed - and they have to be doing exactly the same job because we don’t want to train anybody. Ok, you can want that, but then don’t complain if you don’t find somebody because you are basically creating your own shortage … and that’s new.

20 years ago you probably didn’t hear many employers saying that - certainly 30 years ago they all said ‘we’ll hire for attitude and train for skill.’ And now, almost nobody says that - they say they expect people to hit the ground running.

9780875846682.zoomIS: And this is just because employers are not willing to take any risks after getting burned during and following the recession?

PC: Well it’s a little complicated. I wrote a book called The New Deal at Work basically describing the breakdown in the lifetime employment model and most of it has to do with concerns about speed - employers want things done faster, they don’t want to wait to train people.

And I can certainly understand that - but I think some of it too has to do with the fact that we had, more or less, a huge surplus of talent since the 1981 recession when we started laying off skilled and white collar workers which never happened before, or at least not since great depression.

So companies got rid of their training departments because there was this big supply of talent on the outside market, and they didn’t have to train anymore. And now they’ve sort of gutted their human resources department so much that recruiting people are gone, training and development people are gone, and it’s probably tricky for them to do anything other than just hire on the outside.

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It’s funny because I ask employers if they know how much it costs for them to leave their positions open and they have no idea, nor do they have any idea how much it costs to train somebody. What they do know is that they have no training staff and no training budget. So they’re doing it all to themselves, meaning these developments have been underway for probably 20 years, and accelerated by the Great Recession.

IS: Is this issue confined to America or is it happening on a global scale?

PC: It seems to be a distinctly American issue. If you look at the Manpower survey asking employers around the world how much of a problem they are having finding skills, 52% of US employers said they were having a hard time finding people where the unemployment rate is roughly 8.2%.

But, if you look at Norway, where the unemployment rate is about 3%, only 9% of employers are having a hard time finding skills. How could that be? Well, in Norway, they have apprenticeship programs, they’re not expecting to hire people and have them contribute immediately, and they still have something like lifetime employment. So it seems a distinctly American problem to have high unemployment and these complaints about skills.

IS: Do you think automated recruitment software meant to streamline the hiring process promote the problem by weeding out candidates who “could” do the job?

PC: Yes - I think that’s another one of these unintended consequences. I think the reason is partly because employers were trying to make it easier and cheaper to get applications in the 1990s, so they moved everything online. And that makes it easier to get tons of applicants because you can just forward your resume to an employer with a click.

And then they got this problem during the recession when they were overwhelmed with applications because everyone was looking and you could apply to 100 companies as easily as applying to one.  So now the employers are having the problem of screening these applications without having the resources to hire people to do it ... so they rely more on automation … but they over rely on automation to do everything for them with screening and recruiting.

But, software isn’t that good  – software really is a series of yes and no type questions, and all they really assess is your prior experience and the criteria is loaded up on factors like what school you went to and what job you had.

So that’s when you start getting all these crazy stories about people who are over qualified for positions, but can never get through because the software is so constraining and can’t imagine all the ways people could be qualified.

IS: You have been fairly blunt in your conclusion that employers are largely to blame for any skills gap that might be occurring. On that note, have you experienced any kind of backlash from employers who want to put forth that this is not their fault?

PC: No – none, frankly … quite remarkably none, which is really surprising. I’m waiting for it to happen.

One of the reasons might be is that for the applicants, it’s so obvious that the story I’m telling is right. And if you’re an employer and you think it’s wrong, you have to think about how many people you’re going to annoy if you try to make the case that it’s all their [the candidates’] fault.

I don’t think that employers are villains in this though. I’m not suggesting that they’re doing this on purpose, and I’m not suggesting either that they have some huge civic responsibility to train or to hire that they’re not doing. I’m just suggesting that what they are doing doesn’t make business sense and it doesn’t make societal sense either. I’m saying business should look out for its self-interest, and to do that it has to first figure out what it really costs  to keep vacancies open and to chase this very small set of people who don’t need training. If what they are doing isn’t working and complaining about it doesn’t help, what is left to do?  Back to thinking about this as a business problem and what I can do differently to solve it.

Infusive Solutions Inc. is a niche technical recruiting firm within the Microsoft Partner Network dedicated to serving the workforce needs of our clients as well as taking our candidate’s careers to the next level. Join is on Twitter and Facebook

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Topics: Human Resources, IT Leadership