Something weird has happened to the U.S. labor market over the past decade or so. As most hiring managers know all too well, it has split in two.
“There’s one job market for people whose skills are in demand, and who jump around from one employer to another,” observes Paul D’Arcy, a senior vice president at job search portal Indeed.com. “Then there’s the second job market, where long-term unemployment is at an all-time high, and labor participation rates are at all-time lows.”
What does the much-lamented skills gap actually cost U.S. companies? With researchers from London-based Centre for Economic Research, D’Arcy set out to calculate that. Their conclusion: More than $13 billion a month, or roughly $160 billion a year.
Employers’ struggle to find new hires with the right skills, the study notes, is a drag on GDP in two ways. First, the company misses out on potential output, so revenues and profits suffer. At the same time, people who are unemployed or stuck in low-skilled jobs don’t spend as much as they otherwise would. In an economy that depends on consumption to fuel growth, that’s a problem.
Some industries, and some locations, pay a higher price than others, the Indeed.com analysis shows. “Right now, in New York City alone, companies are advertising about 43,000 job openings in sales,” D’Arcy says. Nothing happens until somebody sells something, as the old adage has it, so “if even half of those jobs were filled, the impact on those employers’ revenues would be substantial.”
In D’Arcy’s view, the skills gap won’t begin to close until employers change the way they match applicants to job openings. Out of necessity, some are already doing it differently than in the past. “In fields like food service and education, companies need the same IT expertise and other specialized skills that other industries need, but they can’t pay as much as, say, the financial services industry can,” he notes. “So the lower-paying employers have had to think about how to find and develop a broader pool of candidates.”
Instead of “trying to take the risk out of hiring by looking only at people with a specific set of skills and experience,” he says, “we’re seeing more employers — including big ones like Procter & Gamble and Accenture, who have operated this way for a long time — first assessing candidates’ attitudes and behaviors to find the right ‘fit’ and then training them for the available jobs.”
Those companies look carefully at the traits of their current, proven top performers, then come up with a profile of who is most likely to succeed, and hire people who match the profile, even if their skills and experience aren’t ideal. Says D’Arcy, “It takes a willingness to make a long-term investment in creating your own internal talent pool.”
Sheer frustration with the lack of perfect candidates will drive more employers to go this route, he adds. “Most organizations today still use the same rigid approach to hiring that just doesn’t work anymore, and inventing what comes next is hard,” he says. “But I think we’re seeing the beginning of a trend.”