The Global Talent Crisis

By Edward Gordon
The Futurist, September-October 2009

Contrary to popular opinion, there are plenty of open jobs. What's missing are candidates with skills.

We are in the midst of a global job and talent upheaval, the most remarkable of any job and talent change since the Industrial Revolution and encompassing every aspect of the global economy.

The dawning of a new industrial age, a period characterized by a growing need for highly skilled technical workers, is driving this revolution. From now through the next decade and beyond, this need will grow at an unrelenting pace. This new age will require the reinvention of the education-to-employment system. Simply put, we need to prepare more people for jobs that are now being created by an ultra-high-tech economy. In the United States alone, this high-tech age could spur the economy to a GDP of $20 trillion per year by 2019 (Congressional Budget Office estimate), compared with a little over $14 trillion now. But progress is not guaranteed, and the bounties of success will not be evenly distributed.

In the United States, the official unemployment rate is projected to top out at near 10.5% by 2010. Factoring in the number of people too discouraged to even look for work or file for unemployment, and the number of people working part time who wish to work full time, that figure now approaches 15%. Some 9 million people in the United States only have part-time work, up 83% from a year ago. Part-time workers account for almost 20% of the workforce. That number, too, will likely go up by next year. There will be jobs in 2010, but highly skilled and educated workers will have an easier time in a highly competitive environment.

This is a familiar refrain; we've been hearing alarms about the skills gap for years. But if ever there was a time to get serious about helping workers acquire the right skills, this is it.

Clearing the Decks: What Today's Downturn Means for Tomorrow's Job Market

Over the last 10 years, the real U.S. economy did grow. Unfortunately, too much of the wealth created was based on short-term financial speculation all around the globe and the manipulation of exotic financial instruments. The tech-based U.S. economy failed to invest enough longterm resources to educate the nation's youth, preparing them to work in the next wave of emerging science, technology, engineering, or mathematically based (STEM) jobs.

While much attention has been focused on how many millions of lowskill U.S. jobs have been outsourced, little notice has been paid to how many millions of high-pay, high-skill tech jobs have been outsourced to Europe, Japan, Singapore, or other countries with well-educated labor pools. Meanwhile, U.S. businesses are importing STEM talent from abroad using H-1B visas to keep the nation's tech-based economy operating.

The United States has outsourced advanced technological production, design, and management capacity. Also, many U.S. industries have become over-reliant on H-1B "specialty occupation" visas to import workers from overseas. However, over the next decade, U.S. companies will have trouble building new high-tech factories in high-skill counties like South Korea, Japan, or Germany, because their workforces will have begun shrinking. In fact, many countries will probably bring more production into the United States if they can locate communities that have developed appropriate hightech workforces.

At the same time, U.S. firms will still seek to use H-1B visas to bring engineers, technicians, and other professionals from China and India into the United States. Multiple studies have shown that China graduates about 600,000 engineers each year, but only 60,000 are educated at world standards. India graduates 400,000 new engineers each year, but only 100,000 are educated at world standards. The quality of educational institutions in India and China vary greatly, as they have not yet established the standards comparable to the United States for college/university accreditation. As the Chinese and Indian economies move up the high-tech value chain, they will have increasing difficulty supplying their own talent needs. Hundreds of thousands of foreign nationals are returning home from the United States and elsewhere. They are starting new tech-based businesses or taking advantage of rampant wage inflation driven by skilled worker shortages across China and India.

These trends mean that U.S., European, and Japanese firms will have increasing difficulty importing enough talent over the next decade. In the United States, business will lobby the government to increase the availability of H-1B visas. There simply will not be enough people to fill all the high-skill/high-wage jobs that are going to be vacant around the world.

Meanwhile, U.S. society has pushed many of its best and brightest students and mature workers into finance-related jobs that fed a massive short-term speculative bubble. Many other Americans have ended up in low-pay/low-skill service jobs because thousands of American schools are of substandard quality.

In Search of Technical Talent

Today's U.S. employment picture is extremely muddled. In early 2008, when U.S. unemployment was at 5.6%, 3 million jobs remained vacant (i.e., jobs advertised for six months or more that remain unfilled). The vast majority of vacant jobs are STEM related. They require a good high-school education, plus specialized postsecondary career education, two-year or four-year college degrees, one- or two-year college occupational certificates, or a two- to three-year apprenticeship education.

By May 2009, U.S. unemployment had jumped to 9.4%. However, with more than 14 mi l l ion unemployed, more than 3 million jobs were still vacant, according to Manpower. An analysis of unemployment by education levels helps show why. The unemployment rate for high-school dropouts was 15%, contrasted to 10% for high-school graduates, 7.7% for those with some college, and 4.8% for those with a bachelor's degree or higher.

Manpower's 2009 Talent Shortage Survey also reported that 30% of the world's employers are still facing a talent showdown. Tig Gillion, chief executive at Adecco, another staffing company, agreed that many business sectors were still hiring new people to fill STEM jobs. A Fortune magazine report highlighted firms that had openings for specific positions, including Boeing, Google, Genentech, Cisco Systems, Ernst & Young, Booz Allen Hamilton, KPMG, PriceWaterhouseCoopers, and many U.S. hospitals.

What Do the Labor Shortages Look Like?

After the current recession ends, there will be a growing job crisis around the world due to these talent shortages. Demographic trends in the United States, Europe, Russia, and Japan show a drastic reduction in the pool of new highly skilled workers, due to low birthrates and massive retirements. As the global need for talent grows, even China's and India's educational systems will not be able to produce enough qualified graduates for themselves, let alone act as safety valves for the rest of the world. But the heart of this issue is the seldom understood fact that the education-to-employment system worldwide is badly out of date. The United States and most other nations are not producing enough graduates with the kinds of technical, communications, and thinking skills needed in the twenty-first-century workplace.

Without drastic talent creation changes between 2010 and 2020, the United States will experience a major talent meltdown, with 12 to 24 million vacant jobs stretching across the entire U.S. economy. Businesses will leave the United States searching for scarce talent wherever they can find it. The U.S. economy will stagnate or shrink. For example, in the late 1990s, AMD (Advanced Micro Devices) wanted to build a new high-tech plant. They looked at locations in California and Texas, but company officials felt that the communities they investigated could not produce enough qualified entry-level technicians for their needs. The company went to Germany, built a plant near Dresden in 1999, and added a second in 2004. Germany was a good fit for AMD because of the high technical standards of Germany's dual education system.

The picture of the U.S. economy that emerges is of abundance and poverty: abundance of labor, poverty of talent, and economic pain everywhere. To prevent a chronic job imbalance and a true economic catastrophe, the United States needs to reinvent its talent-creation system.

The Three Forces Driving the Talent Shortage

There are three socioeconomic forces driving us to a talent showdown: demographic declines in many industrialized nations, a skills gap because students and incumbent workers are not receiving the education and training needed for hightech employment, and a cultural bias against undertaking the rigorous educational preparation needed for scientific or technical employment.

* Global demographics. Throughout the industrialized world, birthrates are very low and the proportion of baby boomers retiring is very high. This is a particularly important issue in western Europe and parts of Asia. Replacement-level fertility (on a national level) is generally considered 2.33 children per female, but can be higher in countries with a significant infant-mortality rate. The CIA World Factbook estimates Germany's fertility rate now to be 1.4; Italy's, 1.31; Russia's, 1.41; Japan's and South Korea's, 1.21. This means that the working-age populations in these countries will shrink and have to support higher and higher numbers of retirees.

Shifts in generational values are magnifying the impact of demographic declines. Generations X and Y don't have the same ethos regarding work as their parents did. The baby boomers seemed to live to work and shop. They put up with long hours in exchange for big salaries. That's changing. Many boomers are looking to work less hard as they age, although many may be forced to delay retirement due to declines in investments and pensions. Generation X in particular is more interested in obtaining a good work-life balance. Women are graduating from institutions of higher learning at higher rates than are men, and many want time off to raise children. They want to work at home, flex hours, sabbaticals, and job sharing, but they also want pay parity with men. Many companies are having trouble dealing with those issues.

* The skills gap. Since the original publication of A Nation at Risk in 1982, reports continue to be issued about serious deficiencies in American education. In this age when some form of postsecondary education is a requirement for all but low-wage, low-skill jobs, the overall U.S. highschool dropout rate continues to hover around 30%. Even more alarming, the average high school graduation rate in the 50 largest U.S. cities was 52.8%. In a 2005 survey, 60% of American manufacturers reported that even those high-school students who did graduate were poorly prepared for entry-level jobs.

According to a 2008 Alliance for Excellence in Education report, only half of the 1.4 million twelfth graders who took the ACT tests were ready for college-level reading. Some 42% of public community college freshmen and 20% of freshmen in public four-year institutions need to take remedial courses in basic skills such as reading, writing, and math. Moreover, only 25% of Americans who begin postsecondary education ultimately obtain a full college degree. This is the lowest "survival rate" in any of the major developed countries.

* A cultural bias. A bias exists against gaining the education and training required for science and technology jobs, but not against technology itself.

What's truly amazing is the number of people who love technology - iPods, iPhones, laptops, Twitter, podcasts - but due to cultural reasons, they don't acquire the training to design, repair, or manage the technology. This is now true even in Japan, where they call this phenomenon "the flight from science." Even the tech-driven German economy in 2008 was experiencing a shortage of 75,000 engineers to fill vacant positions.

The baby boomers' formative years were marked by the Cold War arms race and by the space race. The National Defense Act funded a variety of math and science programs in elementary and high schools as well as higher education career programs. This, in turn, supported a major expansion of science and technology across the entire U.S. economy. NASA put men on the moon in 1969 and during the early 1970s; the Soviet Union collapsed in 1991. These events brought an end to much of the U.S. government emphasis on technological expansion. The next generation received far less encouragement to consider these STEM careers.

Starting in 2010, 79 million baby boomers (born between 1946 and 1964) will begin the shift to retirement. As a result, between 2010 and 2020, some technology-based industries will be seeking to replace 100% of their workforces. Overall, 66% of the jobs to be filled during the next decade will be vacancies created by boomer retirements.

Advancing technologies are transforming the nature of occupations. All the skilled trades and many installation and repair positions now require the use of advanced technologies that continue to evolve at a rapid pace.

The number of new technologies introduced over the next decade will likely be equal to those invented over the last 50 years. Yet the current breakdown in the global talent-creation systems does not bode well for the future.

Rebuilding the Talent Pipeline

If between 2010 and 2020 the U.S. education-to-employment system remains unchanged, the United States will see increasing numbers of people, even degreed individuals, with poor job prospects.

Can this gloomy scenario be avoided? Businesses, educators, and unions will all have to play a far more active role in expanding the proportion of highly skilled Americans to fill this widening STEM talent shortfall, and attract new businesses into every American community. The problem demands much broader investment by large and smaller businesses through updated career education systems formed in partnership with other community leaders.

At the national level, the U.S. Congress can encourage these community investments by allowing businesses to depreciate investments in training and education, just as they now depreciate investments in plants and equipment. This will encourage a significant increase in employee training, particularly for entry-level jobs. Businesses will also have an incentive to invest in career information and education programs in community elementary, secondary, and postsecondary institutions to rebuild the shattered education-to-employment pipeline. Currently, U.S. businesses invest around $53 billion annually in training and education. This could grow to $100 billion if such initiatives prove successful.

Across America, numerous community- based organizations (CBOs) and nongovernmental organizations (NGOs) have been at work for more than a decade expanding business- education partnerships. They have mobilized the broad participation of chambers of commerce, unions, parent organizations, workforce boards, economic-development organizations, professional and trade associations, and other community groups. In Santa Ana, California; Fargo, North Dakota; Danville, Illinois; Mansfield, Ohio; and in many other communities, these local CBOs and NGOs are now making significant local investments to reinvent the local and regional education-to-employment systems. They have helped businesses stay competitive through worker retraining and elementary/ secondary/postsecondary career-education programs. These CBOs and NGOs are rebuilding talent pipelines and helping to attract new businesses offering higherwage, higher-skilled jobs for their communities.

The long-term goal of these CBOs and NGOs is very simple. They seek to change the education and training systems in their own communities and then the mandates in their states so that all elementary, high school, and postsecondary schools will be able to offer the educational and training programs that realistically support a knowledge economy.

The global talent showdown will affect entire economies, and it will be felt by everyone. We must all be part of the solution.