Why The Skills Gap Is Still Growing

August 26, 2024 Visual Workforce

Why The Skills Gap Is Still Growing in 2024

As industries continue to evolve in an increasingly digital era, the skills gap in the workforce persists and even widens. Recent statistics highlight the extent of this growing challenge:

87% of companies worldwide report skill gaps or expect them within a few years (McKinsey, 2022)
75% of employers report difficulty in finding skilled talent (ManpowerGroup, 2023)
The global skills gap could result in $8.5 trillion in unrealized annual revenues by 2030 (Korn Ferry, 2022)
The U.S. Bureau of Labor Statistics predicts only 6.4 million workers will be added to the labor force from 2022
to 2032; the smallest ten-year increase on record.
- 3.8M of that growth is expected to be age 65+
- 2.6M age 16-64

A new data analysis report from Lightcast, a provider of trusted global labor market data, analytics, and expert guidance, shows U.S. employers will soon face the largest labor shortage the country has ever seen, putting urgent pressure on both public and private entities to pivot their talent strategies and build a future-ready workforce.

Lightcast’s report, “The Rising Storm: Building a Future-Ready Workforce to Withstand the Looming Labor Shortage,” shows how Baby Boomers’ retirement, plummeting childbirth rates, and historically low labor force participation will compound to create a deficit of six million workers by 2032. With the biggest impacts expected to hit the healthcare, hospitality, and service industries hardest.

60% of U.S. employers have job openings that stay vacant for 12 weeks or longer (Careerbuilder)

Nearly 80% of Americans agree there is a skills gap, and more than 35% say it affects them personally (Udemy)
The World Economic Forum’s research shows that 6 out of 10 employees will require training before 2027
The skills gap could leave a damaging $2.5 trillion impact on the U.S. economy over the next decade (Deloitte)

These figures underscore the urgency for business leaders to address workforce skill gaps proactively.

Why Is It Important for Companies To Address The Growing Skills Gap?

The financial impact of skill gaps on individual companies is significant. Extended job vacancies can cost large organizations an average of $1 million annually (Indeed, 2023).
69% of employers report that skill shortages negatively impact their business, with decreased productivity being a primary concern (SHRM, 2023).
To put that last statistic into perspective, that’s around $250 billion a year. The skills gap is real and impacting businesses like yours every day. It’s time for business leaders to take action to address gaps in their workforce.

Why Is The Gap Still Growing?

Rapid Technological Advancements: Digital transformation continues to reshape industries, with 91% of businesses engaged in some form of digital initiative (Gartner, 2023). The demand for technical skills now extends far beyond the tech sector, affecting fields such as healthcare, finance, and manufacturing.
Education System Lag: Despite growing demand, only 51% of high schools in the U.S. offer computer science courses (Code.org, 2023). This disconnect between education and industry needs contributes to the persistent skills gap.
Insufficient Workplace Training: A survey by the World Economic Forum (2023) found that only 42% of employees feel their company offers adequate upskilling opportunities. Many organizations still prioritize external hiring over internal training, despite the scarcity of technical skills in the job market.
Lack of Strategic Approach: Many companies lack a comprehensive strategy to address their specific skills gaps. Only 32% of HR professionals say their organization has a skills taxonomy in place (Gartner, 2023).

What Can Your Company Start Doing Today To Address The Skills Gap?

Invest in Workforce Skills Planning

Implementing a data-driven skills planning strategy is crucial. This approach involves:

Conducting regular skills assessments
Utilizing advanced HR analytics tools
Developing targeted upskilling and reskilling programs
Collaborating with educational institutions
Fostering a culture of continuous learning

By taking these steps, companies can better align their workforce capabilities with current and future business needs, potentially saving millions in hiring costs and gaining a competitive edge in their industry.

As the skills gap continues to impact the global economy, business leaders must take decisive action. Investing in comprehensive skills planning and development can lead to significant cost savings, improved performance outcomes, and enhanced competitiveness in an ever-evolving business landscape.

Why Is It Important for Companies To Address The Growing Skills Gap?

Cost. Yes, the skills gap is predicted to take a big chunk of change from the U.S. economy, but how does that impact individual companies? Korn Ferry's research predicts that by 2030, there will be a global talent shortage of more than 85 million people, which could result in $8.5 trillion in lost annual revenue for companies. On average these vacancies are costing employers up to $800,000 annually.

Productivity. 55% of employers say they have seen a negative impact on their business due to extended job vacancies. One of the most significant adverse effects is productivity loss, which directly affects performance outcomes. Growing costs and lower productivity is a recipe for bad business.

Why Is The Gap Still Growing?

Technology Advancements. Digital transformation is sweeping the economy and the trend isn’t limited to technical industries. Today, nearly 80% of companies are in the process of digital transformation. Finance, retail, manufacturing, and even law are all experiencing a new demand for technical skills. However, the workforce hasn’t caught up to the growing demand.

While technology rapidly changes, people are slow to change. 1 in 5 workers says their professional skills are not up to date. It takes time for people to learn the skills necessary to fulfill new roles in fields like computer science.

According to a White House fact sheet, “Computer science is not only important for the tech sector, but also for a growing number of industries, including transportation, healthcare, education, and financial services, that are using software to transform their products and services. In fact, more than two-thirds of all tech jobs are outside the tech sector.”

Education Is Struggling to Keep Up. Employees aren’t the only ones lagging behind the technology curve. Education programs, the foundation for the future of the workforce, are struggling to provide the proper training in necessary STEM skills.

According to a recent survey, Nine in 10 parents want their child to study computer science, but only one in four schools teach computer programming. This disconnect reflects a lack of coordination between the supply and demand sides of the job market. Employers and educators need a better way to communicate the needs of businesses.

Lack of Training. In a survey conducted by MIT Technology Review, “manufacturing survey data indicate that only half of U.S. plants provide formal training to their production workers. By contrast, in the 1990s—the last period for which nationally representative survey data on training are available—70 to 80 percent did so.”

Companies are trying to fill positions through hiring instead of offering training to their existing workforce to strengthen areas of weakness. Technical skill sets are scare in the job market. This outward strategy is leaving employers with long-standing vacancies that are damaging their workforce’s performance and their bottomline.

No Defined Strategy. Many business leaders have not implemented a strategy that defines how they will address the skills gap in their own companies. Many continue to rely on informal techniques, like internal networking, to identify gaps in skill sets instead of leveraging data to understand the current skills and capabilities of their workforce.

Without a well-defined strategy, companies cannot effectively address their workforce needs. They cannot successfully communicate their skill needs with educators. They cannot implement effective training programs. They cannot align their recruitment needs to fill the gaps in their workforce.

Bottom-line: Your company must have a strategy to address the skills gap hindering your workforce’s potential.

What Can Your Company Start Doing Today To Address The Skills Gap?

Invest in Skills Planning. Skills planning is a tool that allows you to identify the current skills and capabilities of your workforce. It helps you recognize skill gaps and provides a clear vision for how your workforce needs to change or grow.

Skills planning starts by tracking data on your current skills and capabilities. Instead of estimating or guessing employee skill sets, data provides you a reliable, concrete path for how your workforce needs to change. You will know your employees’ exact strengths and weaknesses for both hard and soft skills, allowing you to develop a data-driven foundation for your action plan. After you collect the data, use visualizations to show clear, actionable insights quickly so that you can make effective business decisions efficiently.

Related Post: The Power of Data Visualization

Now that you understand the current skills and capabilities of your workforce, you can use this information to identify the gaps and growth opportunities. What does your ideal workforce look like? Do you need more skills in a particular area? How will you reach that ideal state?

Use your insights to develop training programs, align recruiting needs, collaborate with educators, or outsource skills. Whatever path you choose to take to address the gap, your investment in skills planning will ensure your skills align with the needs of your workforce.

As the skills gap continues to impact our economy, business leaders must take action to address gaps in their own workforce. The result could mean hundreds of thousands of dollars saved, high-performance outcomes, and an advantage over your competition. Take the necessary steps and invest in skills planning to ensure your company continues to succeed and grow.

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