How corporate America can close the skills gap by Joseph B. Fuller @FortuneMagazine March 5, 2015, 6:00 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Since President Obama last month announced his proposal to make two years of community college free for many students, a number of commentators have expressed concern about a “blunt instrument” approach to higher-education access. They are, quite literally, on the money. The President’s desire to expand opportunities for American workers is a noble one. The U.S. has indeed failed for years to position aspiring workers to share in economic prosperity. But the essential driver of that failure — for which both businesses and policymakers have a measure of responsibility—is not a matter of cash for tuition. The erosion of the skills base of the American workforce, especially for middle-skills jobs (generally defined as those requiring education or training beyond a high-school diploma but less than a four-year degree), is a major threat to U.S. competitiveness. Employers across sectors and geographies have difficulty finding workers with relevant skills; aspiring workers lack insight into which skills are in demand and access to the resources to develop their talents fully. What is to be done about this chronic weakness? To begin, employers need to take the lead. Few American businesses have developed a sufficient understanding of how dependent their competitiveness is on the supply of skilled labor. Companies poach talent from each other and from training providers, rather than developing it. When community college programs disappear after a local employer hires all the students and the instructors en masse (as happened with a welding program in Louisiana recently), the implication is clear: businesses are thinking in the short term, relying on the spot market for talent, rather than cultivating talent pipelines to ensure their long-term competitiveness. Companies provide too little visibility as to what they currently require or anticipate requiring from workers in the future, and they invest too little in guiding and supporting the educators on whom they rely for talent. Educators, for their part, should recognize that a paramount measure of success is the ability of their graduates to obtain gainful employment. Employers’ needs determine what constitutes relevant curriculum for the overwhelming majority of students who will seek jobs outside of academia. Many progressive educators understand that, but they lack the resources to forge enduring partnerships with employers. Companies should not overlook the opportunity to cultivate such relationships. Finally, policymakers need to understand that their principal role is to foster an environment in which the marketplace for skilled workers clears more efficiently. They can best serve their constituents by encouraging better communications between employers and educators and providing better information resources on the job market. They can also support the spread of programs proven to work locally to other jurisdictions and to spur innovation, as the federal government did with its Race to the Top program in K through 12 education. Most importantly, policymakers must recognize the impact of policy decisions on the appetite of employers to hire new workers. Our research indicates that many companies have come to view hiring a new full-time employee as a solution of the last resort, preferring to invest in technology or rely on suppliers to address their needs. Governments at all levels should seek to understand the underlying causes of that trend, and they should assess future legislation and regulation in terms of their potential impact on employment. Skills gaps in diverse industries and in many local labor markets threaten to prolong the stagnation of wages and living standards of the average American and therefore contribute to growing income inequality. American businesses must lead the effort to close the skills gap by taking a sustained, long-term approach to cultivating talent. Educators must work with business to revise curricula in order to better prepare students for success after graduation. And finally, Washington and state policymakers must create a policy environment that is conducive to training Americans to acquire the most in-demand skills. If these three groups worked collectively to close the skills gap, both companies and workers would benefit from the resulting rise in America’s competitiveness. Joseph B. Fuller is Senior Lecturer in General Management at the Harvard Business School and co-author of Bridge the Gap: Rebuilding America’s Middle Skills. He is on the faculty team of the School’s U.S. Competitiveness Project.