A $1 million problem and so much more

This morning, while checking on the status of the skills gap—if one does indeed exist—I ran across a recent study by CareerBuilder that looked at the costs associated with not being able to fill job vacancies. The study revealed that nearly 60 percent of U.S. employers have job openings that stay vacant for 12 weeks or longer. The average cost HR managers say they incur for having extended job vacancies is more than $800,000 annually.

According to the study, 68 percent of employers who said they were increasing their number of full-time permanent employees in the first quarter of 2017 currently have open positions for which they cannot find qualified candidates. The findings are consistent across company sizes with larger companies, which tend to have more job openings in general:

1-50 employees: 49 percent

51-250 employees: 74 percent

251-500 employees: 72 percent

501+ employees: 71 percent

An analysis of job listings compared to the number of hires illustrates the gap. For example, the average monthly unique job postings for industrial engineers from January 2016 through December 2016 was 48,749; the number of monthly hires for that period was 8,156.

Two in three employers (67 percent) from the survey say they are concerned about the growing skills gap. More than half (55 percent) say they have seen a negative impact on their business due to extended job vacancies with a sizable proportion of these employers pointing to productivity issues, an increase in voluntary turnover and revenue loss:

Productivity loss: 45 percent

Higher employee turnover: 40 percent

Lower morale: 39 percent

Lower quality work: 37 percent

Inability to grow business: 29 percent

Revenue loss: 26 percent

Those doing the hiring are not the only ones noticing the issue. One in five workers (20 percent) say their professional skills are not up to date. Fifty-seven percent of workers reported that they want to learn a new skillset to land a better-paying, more fulfilling job, but half of them said they can't afford to do so.

This doesn’t bode well for remedying the current situation and for the future workforce, particularly when you take into account the growing numbers of young people who lack the necessary skills and training options. We often think this is a problem in urban areas with high dropout rates and more job competition. The scope of the problem is much greater and growing.

A recent Huffington Post article reported that “the percentage of ‘disconnected youth’—16- to 24—year-olds who are not in school or working—is now higher in rural areas than it is anywhere else.”

“In rural Worcester County, Maryland, a popular summer destination that includes Ocean City and other beach resorts, almost 25 percent of people 16 to 24 are unemployed and out of school, according to a recent state report.

“That’s the highest rate in the state, higher even than in Baltimore, where about 20 percent of young people are disconnected. And it’s being felt hard in this quaint small town, where good seasonal jobs are 40 miles away and the nearest job-training program is about 25 miles away.

“‘Traditionally the perception has been that this is happening in urban areas and that’s where the funding and the research has taken place,’ said Christina Church, a policy analyst in the Maryland Governor’s Office for Children. Areas like Worcester and nearby Caroline counties ‘have in some ways fallen through the cracks,’ she said.

“Nationwide, 4.9 million youth in all kinds of communities are disconnected, according to Measure of America, part of the nonprofit Social Science Research Council. Disconnected youth cost taxpayers as much as $93 billion a year in lost revenue and increased social service spending, according to Opportunity Nation, a coalition of nonprofits.

“About 20 percent of young people in extremely rural areas — those like Worcester County with no cities larger than 10,000 people — were jobless and not in school, on average, over a five-year period, from 2010 to 2014, Measure of America said in a March report. That’s much higher than the rate for counties in urban centers (about 14 percent) or for suburban counties (12 percent).

“‘These vulnerable young people are cut off from the people, institutions, and experiences that would otherwise help them develop the knowledge, skills, maturity, and sense of purpose required to live rewarding lives as adults,’ the Measure of America report concluded. ‘And the negative effects of youth disconnection ricochet across the economy, the social sector, the criminal justice system, and the political landscape, affecting us all.’

The skills gap and its cost to employers and the economy is a drop in the bucket compared to the costs, both financially and socially, associated with disconnected youth. The Huffington Post article describes some initiatives throughout the nation designed to help the latter. If they succeed, the skills gap could disappear. We won’t know until we try.