The Cost of the Employee Skills Gap [Infographic]

New technologies are developing at a rate that is outpacing workers’ existing skill sets. This rapid expansion of technologies has resulted in a “gap” between the skills workers currently have and the new skills they currently need, or will need in the near future, to keep pace with the demands of new technologies. As jobs shift and evolve, workers are not evolving with them, and the number of skills it takes to master a single role successfully is increasing.

One example of this is how, beginning in 2019, millions in the workforce were forced to rapidly develop new skills in video conferencing, project management tools and chat systems, which were never mandatory before, to enable them to work remotely.

But the shortage can also be blamed on simple demographics.¹ Globally, Japan and many European nations have had low birth rates for decades. In the United States, members of the Baby Boomer generation (those born between 1946 and 1964) are anticipated to move out of the workforce by 2030, and younger generations will not have had the time, or the training, to fill many of the highly skilled jobs they will leave behind. According to a Pew Research Center analysis, the number of retired Baby Boomers rose more from 2019 to 2020 than in previous years.

The reality of the skills gap has been confirmed by 80% of CEOs, who express a concern with the availability of digital skills in their workforces. 87% of companies say they currently have skills gaps,² or expect to have them in the next few years.

American business leaders have long advocated for more effective, and earlier, STEM (Science, Technology, Engineering and Mathematics) education and exposure to industrial and technological career opportunities, and that technology should be added to reading, writing and arithmetic to complete a child’s education. That seems like a viable long-term strategy, but what about the short-term needs of employers who are struggling with the current skills gap?

To keep pace with technological advancements and provide a talent succession strategy to defend against a coming wave of baby boomer retirements, employers are embracing workplace training and education programs that upskill and reskill current employees. Partnerships between employers and educational institutions can be effective tools to build a sustainable talent pipeline, providing training in job-related skills, and personal enrichment opportunities, without requiring employers to develop costly in-house learning and development programs.

The current skills gap affects enterprises and workplaces in many ways, impacting productivity, employee turnover rates, moral and job satisfaction, and financial performance.

A recent report³ shows that, by 2030, more than 85 million jobs could go unfilled because there will simply not be enough skilled workers to fill them, and this talent shortage could result in $8.5 trillion in unrealized annual revenues.

The report further notes that, in the technology sector alone, the United States could lose $162 billion in annual revenue if it’s not able to find more workers with the skills to interact with new technologies such as artificial intelligence, and risk losing its stature as the global tech leader to India, a country that could have a surplus of more than 1 million high-tech workers by 2030.

Without the required synergy between skills readiness and the demands presented by new and anticipated workflows, processes can become inefficient. This leads to wasted time and resources, and reduced profitability. Another consequence is a reduction in quality, as untrained or poorly-trained workers are pressed into service on tasks for which they do not have the required skills.

Workers may be likely to leave on their own if not given opportunities to “skill up” to higher-paying positions or if they feel their employer organizations don’t support them. High employee turnover rates can result in a vacuum of intellectual capital left by departing, senior members of the workforce. Restoring this knowledge is something that could take years to achieve.

The damage caused by the skills gap goes directly to an organization’s bottom line. Companies that are unable to produce and ship finished products or provide vital services in cyber security and other areas because of skills shortages could certainly be faced with some harsh realities in terms of reduced sales or scaled back orders and the resulting reduction in revenues.

Companies considering internal L& D programs to skill up existing employees or new hires may have a similarly chilly reckoning, considering the high costs associated with such programs.

Research has shown the extent to which employee job satisfaction suffers when skills gaps are left unfilled.  There is much more at stake than skills alone. Employee frustration and disengagement are common,⁴ with 55% of workers saying that a lack of confidence in their workplace abilities makes their job more stressful, and 38% reporting their mental health suffers.

Rising levels of workplace stress can result in a syndrome that is generally called burnout. In its 2021 Work and Well-Being Survey, the American Psychiatric Association reported that 79% of American workers had experienced work-related stress in the month prior to the survey, with some occupations being more vulnerable than others to burnout’s effects. Nearly 3 in 5 employees reported negative impacts of work-related stress, including lack of interest, motivation or energy.⁵

A workforce with a skills deficit will struggle to keep pace with the demands of changing markets and consumer-driven product innovations.  That means companies with such workforces will struggle to keep up with competitors and may experience a decline in both market share and revenue.

How can organizations close the gap? It is clear that employers must prioritize employee training and development efforts, including  upskilling and reskilling, and to be more inclusive in their recruitment and retention strategies.

Recent surveys of the global workforce indicate employees are eager to acquire new skills, but fear employers aren’t doing enough to provide training opportunities. Workers are also concerned their job skills, along with their jobs, will become obsolete due to the uptake of new technologies like automation, artificial intelligence and robots in the workplace. 

Recent surveys of the U.S. and global workforce reveal employees’ concerns about their job security and interest in learning new skills, and employers’ opinions about the effectiveness of reskilling programs:

Research shows that workers want to learn new skills to meet the challenges of a digital and somewhat fluid future, and that leaders need to do more to provide opportunities for workforce upskilling and reskilling.

Employers can look to their recruitment and retention strategies for ways to close the skills gap. Organizations are rethinking their recruitment strategies to broaden their spectrum of talent sourcing with an eye toward training applicants with transferrable skills, rather than adhering to restrictive and specific skills requirements.

In talent succession planning, education assistance programs are an effective way to help employees acquire the skills they need to fill positions left vacant by the loss of older, more experienced workers. 

A recent report of the career advancement needs of employees of middle-market companies (with annual revenues between $50M and $100M) acknowledges that career ladders and training programs are known to contribute to retention, and that without these programs in place, middle-market companies are more vulnerable to losing their talent to larger organizations. Yet, 61% of these firms lack a systematic process for career advancement, substantially diminishing their ability to groom talent from within and help employees move up in the organization.¹⁵ 

To meet the challenges created by the skills gap head on, employers will have to put much more emphasis on the retention and training of their existing workforce. Workers and organizations will need to adopt a culture of continuous learning and training, with programs that allow workers to acquire the skills needed to take on current demands and the demands that have yet to be encountered. Organizations may have to rethink recruitment and retention strategies, from talent sourcing all the way through to employee benefit and retirement programs, to create workplaces where the acquisition of new skills is seen as an investment in the future of both the worker and the organization.

At DeVryWorks, the workforce solutions partner of DeVry University, we can help you identify and close skills gaps by establishing learning pathways that “future proof” your organization and ladder up to your talent succession planning. We can help you acquire, elevate, train and retain the diverse, talented and productive workforce you need to fill current and projected talent gaps in IT and cyber security, accounting and finance, operations and supply chain management and other areas.

Contact us today to learn more.