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Untangling the Skills Mismatch Debate: Implications for Local Economic Development

August 31, 2012

The skills mismatch debate underscores why a solitary focus on college completion is insufficient to build competitive regional economies.

The paradox of persistent unemployment and unfilled jobs has many analysts pointing to a  skills mismatch in the economy.  This widely accepted hypothesis has come under fire recently, with implications for local and regional economic development.

Looking deeper inside the black box of matching workers with jobs reveals more nuance than unavailable skills. A wage gap, lack of recruiting intensity, strict hiring requirements, and lack of hiring are also at work.

The Chicago Fed’s research finds that although a skills mismatch does not exist across the board, there seems to be one for middle skill jobs, or requiring education and training beyond high school but less than a bachelor’s degree.  Martin Scaglione, president of the ACT Workforce Development Division, in an interview with blogger George Lorenzo, affirms this finding from the supply side perspective. “There is not enough talent coming through the system to meet the demand for jobs at the middle-skill level, and there is an overabundance of low-skilled workers.”  Lorenzo observes that “many college graduates are being forced to take on middle-skill jobs, thus sending those who should be filling those jobs into the low skill arena,” further complicating the job market.

Analysis of future job markets finds that the share of jobs requiring more than just a high school diploma will increase from 59% in 2008 to 63% in 2018, but about 30% of all jobs will require a technical degree or certificate, not a bachelor’s degree.  The Bureau of Labor Statistics similarly finds that jobs in growth industries will be predominantly middle-skilled.

So, what does this all mean for local and regional economic development?

In the knowledge economy, talent is clearly an economic asset.  By “talent” I mean a pool of appropriately skilled labor.  The skills mismatch debate reveals that appropriately skilled will include a mix of high and middle-skilled workers and will vary to a large degree by regional job market. Expanding and enhancing the pool of talent requires integration of workforce development and economic development to address the needs of employers and provide opportunities for those in the community.

But, recent policy dialogues have conflated “talent” with a college degree, encouraging practitioners on the ground to tie a neat bow of “college for everyone” around the complex challenges of unemployment, a competitive workforce and business viability.  Why would we narrowly focus on bachelor’s degrees as an indicator of an appropriately skilled workforce, when the weight of evidence suggests the skills mismatch is as much about mid-skill jobs?

The “college for everyone” movement rests on solid foundations.  Economic development experts have long noted the key role of “human capital” (another take on “talent”) in driving economic growth.  But lacking better data, many analysts default to using the Census’ “percentage of adults 25 and older with a bachelor’s degree or more” to measure the human capital, or talent, of the workforce.  There’s also the notion that this figure drives site selection decisions, as many a top 10 list would suggest.

I’m not suggesting that a well-educated workforce shouldn’t be a goal.  But, it’s only part of the equation, and part of what makes an area attractive to business.  Businesses that are looking for a talent pool to stay productive and successful are not just looking for a high percentage of college degrees in the area.   They are looking for the right mix of skill sets.

Policies based primarily on increasing college attainment rates neglect the range of skills needed by job creators and compel the use of local talent chasing strategies.   Talent chasing favors low-hanging-fruit approaches, like building coffee shops and artist lofts, or out-competing other jurisdictions for small gains in the percentage of college graduates, rather than driving at the harder work of growing a pipeline of talent in the community.   Like smokestack chasing, too much emphasis on chasing college graduates is zero sum for national economic growth and can’t make up the gaps in skills in severely depressed economies.  Everybody wants to be Seattle, with its 50%+ population of college graduates.  But, if your city’s percentage is nowhere near Seattle’s, no amount of coffee shops, artist lofts and talent attraction will solve your underlying economic challenges.

Enhancing the talent pool includes college completion, but it also means improving education pipelines and training systems, ensuring that these are flexible enough to keep up with changes in business demands, communicating with the business community, understanding and anticipating needs of growth industries, and having a grasp on available and future human capital assets.  Places as diverse as Garland, Tex., Northeast Indiana, St. Louis, Ventura, Calif., and Seattle have created systems and partnerships to build their pool of talent and expand, retain and attract businesses.

While there is no doubt that the knowledge economy values high skilled individuals, and that communities with higher skills will be competitive, building strong economies for the long term requires creative, and often difficult, approaches to education systems, workforce development, and economic development to grow a range of skills in the community that are appropriately matched with and able to leverage job growth and local assets.

Attribution: I’d like to thank Chris Hoene and Katie McConnell for their insights, contributions and “water cooler” conversations on the complex topics of workforce development, talent attraction and the skills mismatch debate.

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3 Comments leave one →
  1. September 1, 2012 8:56 AM

    Very good article. The skills mismatch appears to be more pronounced (though I have no empirical data to support this) in a rural setting where the emphasis has been the 4 year college and moving away to “the big city” where more opportunities abound. We are in the process of redefining what “economic development” means to the region and a much more focused workforce development partnership will be one of the primary drivers.

  2. Blair Forlaw permalink
    September 1, 2012 9:19 AM

    Christy, you make some excellent points. College credentials are just one way of evaluating the skills of the workforce needed to grow our economy. Employers in St. Louis told us that a college degree is the “ticket to get in the door” for a good job, but they look for other qualities when they evaluate candidates, as well. These include communication skills, ability to work on teams, problem-solving, critical thinking, flexibility, and other ‘soft skills’ that are difficult to measure. It’s important that cities take a big picture view of talent development in this competitive global economy where talent is a key differentiator.

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