A New Twist on the Skills “Blame Game”

February 8, 2013

It is conventional wisdom that the United States is suffering from a severe skills shortage, for which low-performing public schools and inadequate teachers must shoulder part of the blame (see here and here, for example).  Employers complain that they cannot fill open slots because there are no Americans skilled enough to fill them, while pundits and policymakers – President Barack Obama and Bill Gates, among them – respond by pushing for unproven school reform proposals, in a desperate effort to rebuild American economic competitiveness.

But, what if these assumptions are all wrong?

What if the deficiencies of our educational system have little to do with our current competitiveness woes? A fascinating new book by Peter Cappelli, Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It , builds a strong case that common business practices – failure to invest adequately in on-the-job training, offering noncompetitive wages and benefits, and relying on poorly designed computer algorithms to screen applicants –are to blame, not failed schools or poorly prepared applicants.

Cappelli, a professor of management and director of the Wharton School’s Center for Human Resources, has been making the rounds (hereherehere, and here), trying to introduce some balance, logic, and research evidence into the debate over skills, educational performance, and economic competitiveness. In his book and many interviews, Cappelli notes that there are two central parts to the debate (see here):

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 so, he argues, at a moment when the labor market contains the “greatest surplus of talent in modern times,” it’s just not credible that U.S. employers somehow can’t find enough qualified people. What, then, is going on? According to Cappelli, people have simply accepted business’ “self diagnosis” as the truth. The beauty of this for business is that it takes them off the hook for not hiring and training more employees. On the other hand, it deflects attention away from some serious management errors that damage not only individual businesses and job seekers, but also the economy as a whole.  In Capelli’s analysis, “there is not a single part” of the conventional wisdom on the unskilled U.S. worker that is true.

He argues that employers are not looking for the academic credentials they need, but the specific job experiences they want. The resulting job descriptions are so tightly drawn that it is very difficult to find anyone with the exact credentials and experience they are seeking. Why? Because they don’t exist, except perhaps at competitor companies. Although employers could offer some kind of wage premium to lure such employees into switching jobs, most have not been willing to do so.

In decades past, businesses that found themselves in the same situation would hire the candidates with educational background and personalities that seemed to be a “good fit” with the company’s culture. They would then train the new hires to meet their specific needs. But employers simply aren’t willing to invest much into their employees’ skill development, and haven’t been for years. As Cappelli notes, only 21 percent of U.S. employees received any training from employers over the past five years. More or less in line with this philosophy, many corporations have also gutted their human resources departments, so much so that they now rely on software programs to sort through job applications and identify new hires.

But that software is just a crude screen. It often overlooks qualified applicants who, if companies actually interviewed them, would easily make the cut.

This failure to invest in human resources and human development is matched by what seems like an unwillingness to actually pay those humans an attractive wage. Cappelli writes that executives admit that highly qualified people don’t seem to want to work as cheaply as the company would wish. They see this as a problem, but not enough of a problem to actually raise wages.

One related issue that Cappelli doesn’t fully explore is the employment visa issue, particularly the H-1 and L-1 visas that permit employers to import skilled foreign workers with the claim that they are unable to find enough qualified U.S. workers. Too often, these visas allow employer to hire foreign workers – or foreign students looking to stay in the U.S. – at far lower wages and far worse working conditions than would be acceptable in the open U.S. labor market. That is, the issue is not really one of skills supply, but of unreasonable employer demands.

As one remedy, Cappelli urges greater public and private funding for and overall improvements to vocational education – more commonly known as career and technical education, or CTE – as well as more organic connections between schools and employers. Regrettably, though, he downplays the untapped potential of the existing network of union apprenticeship programs in favor of some sort of new business-run quasi-apprenticeship system. (For more on sensible human capital development policy and the important role of apprenticeship, see here and here.) He needs to investigate more fully the rich substance offered in programs supported through labor/management collaboration that remain healthy and vital in certain industries.

These criticisms aside, Cappelli has performed a valuable public service by casting a skeptical eye on the failing schools/unskilled American workers fable, and urging employers to strengthen both their businesses and the nation by starting to invest in American workers again.

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Randall Garton

Randall Garton is the Director of Research and Operations at Albert Shanker Institute.