There is a big opportunity to close the skills gap by aligning what is taught in the classroom with the skills employers need through competency-based education paired with skills based hiring. Slow progress is largely due to our nation’s focus on college as the only pathway to economic mobility.
The U.S. labor market continues to tighten while millions of Americans struggle to make ends meet. As of July 2021, the U.S. had a real unemployment rate of 9.2% and there are 52 million Americans making under $35,000 per year.
At the same time, the U.S. labor market is the most competitive talent market in recent history. Workers have become more confident in seeking better employment opportunities, and employers of all sizes across multiple industries are struggling to hire qualified candidates. The Bureau of Labor Statistics reported 8.1 million open jobs in the U.S. at the end of March 2021, the highest amount since the bureau began tracking the data in December 2000.
The U.S. Chamber of Commerce Worker Availability Ratio found that there are currently 0.88 U.S. workers available for each job opening, and more than half of U.S. states (28) have more open jobs than available workers to fill them.
In its May 6, 2021 jobs report, the National Federation of Independent Business reported that a record 44% of small-business owners reported job openings they could not fill in April 2021, up from 24% in April 2020, and up from the average of 22% over the past 48 years.
As competition for prospects increases, hiring mangers face pressure to get innovative and deliver qualified candidates who have the skills needed to thrive in their organizations. Chad Moutray, NAM Chief Economist, said “Manufacturers consistently cite the inability to attract and retain talent as their top concern, and, they are taking strong proactive steps to overcome it.” The Institute’s survey estimates the sector spent more than $26.2 billion on training programs, both for new and existing employees. 69.9% of firms reported they were either creating or expanding internal training programs, and 84.6% reported job-related technical training.
As Cheryl Oldham, Senior Vice President of the U.S. Chamber of Commerce Foundation’s Center for Education and Workforce says: “We need to move toward a skills-based approach for educating and hiring where the skills taught in the classroom directly align to the skills required for a career.”
This trend is accelerating as shown in a recent survey from the U.S. Chamber Foundation:
There has been a lack of skilled talent among the available workforce in recent years. Nearly three-quarters (74%) of respondents agreed.
Employers and hiring managers are preparing for a world where competencies – not degrees – are the most important factors when filling a job.
Respondents (78%) acknowledged the need to overhaul their hiring practices to make this shift to focus on competencies.
Employers are working with higher education to align what is taught in the classroom with the needs of the economy.
High schools still focus on their university placement as the best judge of a quality education and fail to provide guidance towards alternative pathways. This is unfortunate for the 60% of students who leave the school system by sophomore year of college and enter the workforce without the skills needed to achieve a good quality job.
High tuition costs, long-term student loan debt, and difficulties finding a job in the field of their major should motivate students to look at higher ROI alternatives from the start. It is time we reduce the stigma around technical training in the U.S. In most other countries around the globe, a skilled labor profession is not a second choice, but a conscious decision leading to a good job and a fulfilling life.
“The new world of work is about skills, not necessarily degrees,” said JP Morgan CEO Jamie Dimon.
“Unfortunately, too many people are stuck in low-skill jobs that have no future and too many businesses cannot find the skilled workers they need. We must remove the stigma of a community college and career education, look for opportunities to upskill or reskill workers, and give those who have been left behind the chance to compete for well-paying careers today and tomorrow. “
There are increasing examples of higher education institutions, especially community colleges, working together with employers to build the skills students and employees need to succeed. 64% of employers say their organization has collaborated with schools to make curriculum more responsive to workforce needs. This is the most important way to help universities to remain relevant. As of today, 82% of corporate executives still believe that a college degree is important or essential and 63% express confidence in college and universities, but only 45% of the American public does.
This collaboration between employers and schools around competency-based education and skills training represents the critical pathway to closing the education to employment skills gap, and investors are investing in ways that measurably build this bridge to success. We at New Markets Venture Partners, the oldest edtech and workforce venture capital firm in the U.S., recently made three investments that provide skills training: Pathstream, CreatorUp, and App Academy.
Pathstream prepares students for high-demand non-coding digital skills careers. The Company’s programs are developed with leading technology partners and delivered via OPM (online program management) relationships with 12 leading university partners. Pathstream offers five certificate programs co-branded and developed with: Facebook, Tableau, Unity, Salesforce, and Asana.
CreatorUp is a digital creative platform and digital media training company that empowers learning organizations to order educational video creation and production through a highly streamlined platform. CreatorUp has as a unique differentiator their global network of talent, with more than 5,000 creative professionals worldwide registered with their talent-side platform, signing up for projects, and accessing training and upskilling.
App Academy is one of the most respected coding schools in the industry, offering online and in-person training programs with the option of no tuition cost until you are hired as a Software Engineer. App Academy offers a variety of training programs, including a 16-week immersive coding and job placement program (“Campus Hybrid”). The mission of App Academy is to lower barriers to education and provide students with the tools and skills necessary for success in the software development space.
Companies such as these that partner with both higher ed and institutions and corporate hiring partners to bridge the skills gap will increasingly be needed to address the failure of our current education system to provide the majority of students with the skills that employers need.
By Mark Grovic, Co-Founder and General Partner, New Markets Venture Partners