Difficulties in Finding Qualified Workers

Peter Cappelli

In a recession, it should be easier to find qualified workers; after all, there are more potential employees to choose from. But that's not what's happening in many cases. Instead, there is a lack of supply to fill company demands for specialized skills. Why are employers so resistant to creating training-and-development programs that could solve their problems?

A number of stories have appeared in the business press in the last few months about employers that cannot find qualified candidates to fill their job openings. These stories certainly have a "man bites dog" quality to them—how bizarre not to be able to find workers when unemployment is near 10 percent.

They are supported, though, by other stories reporting that there are a large number of standing vacancies in the U.S. economy as a whole. About 2 percent of all jobs in the United States are currently vacant.

What's going on here?

Recently, I was in touch with a couple of employer organizations, making policy recommendations about worker and skill issues. Their interpretation of the above findings is that there is something wrong with the supply of candidates. The pool of applicants is not up to snuff, and that suggests public policy needs to intervene to generate more candidates with the right skills.

Is there anything to these arguments? The problem with them is they are based on a peculiar view of how labor markets work, a view that ignores the fact that these are really markets.

One assumption they make is that businesses generate job requirements in an absolute and mechanical fashion that point to an equally clear and absolute set of candidate attributes: We need a scheduler who knows these software systems, has experience with these protocols and knows how to handle the following regulations.

In fact, jobs with the same title get performed very differently across otherwise similar organizations.

It is possible to get the work done in lots of different ways—by teams of people that collectively have the needed expertise, with more help from experienced supervisors to handle some of the challenges, or with information technology, etc. Job requirements are at least somewhat fungible.

The most important issue, though, is that the labor market is truly a market that responds to supply and demand. The proof of this comes from research, which documents the common-sense notion that job requirements adjust depending on how tight the labor market is. When candidates get scarce, requirements slip; when they are plentiful, they rise. Employers can afford to get picky.

Further, there are many different ways to get the expertise needed to perform jobs. In the world of information technology, for example, we typically think of skills as coming in the form of academic degrees or formal certifications. But during the IT boom of the late 1990s, only about 10 percent of the people working in IT jobs had any formal education in IT skills. They picked up their competencies through work experience.

So there are two explanations for the stories about employers not being able to fill jobs even in this deep recession, and they have nothing to do with a shortage of skills.

The first relates to the fact that searching through candidates always makes sense and perhaps is even more worthwhile when there are more of them. Suppose you needed a date for the prom, and your fairy godmother suddenly lined up 12 very attractive candidates, all of whom wanted to go with you.

Would you just grab the first one in line and go? Of course not. You'd check them all out, and the more there were, the longer it would take to do so.

This explains why vacancies persist even in a recession. (Though vacancies exist now, they are at the lowest rate since the data were collected.)

It doesn't make sense to snap up the first candidate who meets the job requirements when others are standing right there. In fact, it may make sense just to go fishing, to see if you can get someone who is really overqualified for the position (i.e., get them at a below market price) if you can wait a bit to fill the job.

The second and more important explanation has to do with the nature of the jobs that employers find hard to fill. I've taken a look at some of the accounts of these jobs—there aren't many of these positions—and at least among the ones I've seen reported, they are never entry-level jobs. There is no shortage of people with the appropriate education credentials for any jobs I've seen. The skills that are in short supply are work-based skills, the kind that are only learned on the job: Experience with these vendors, knowledge of these work practices, an understanding of this industry.

A generation ago, these jobs would have always been filled from within, typically as the result of formal development programs. Now employers want to hire these people on the open market, in other words, from their competitors.

But when everyone wants to do this—poof!—such candidates are hard to find. What I find puzzling is that almost no employers are willing to respond to the above situation by developing talent themselves.

So there is something new about the current situation and it does relate to the supply of talent. It is the fact that so few employers are willing to train and develop candidates even for those positions that seem quite unique to them and even when doing so would appear to save them money.

That may be a problem worth a policy discussion.

First Published on www.HREonline.com, October 12, 2009.