What businesses need and what education systems deliver – a widening chasm?

Having had the opportunity to read an excellent article, “Falling short on skills,” published in the latest edition Hay’s Journal (Issue 5 – 2013), I wanted to share some key highlights from the article. (For full article, please click here: http://www.hays.co.uk/hays-journal/)

The basic premise of the article was around the increasing phenomenon that is “talent mismatch” where the existing labour force does not possess the requisite skills that businesses need. The level of talent mismatch is increasing despite persistently weak labour data, with widespread unemployment globally.

The article examines what businesses and education provides can do to narrow this mismatch and fill the gap required by economies as they look to emerge from the doldrums of a weak economy and avoid the social pressures and friction that persistent unemployment can induce.

A new index, The Hays Global Skills Index 2012, developed jointly by Hays and Oxford Economics designed to understand the trends within the global professional workforce indicates that the skills employers require and the skillsets possessed by jobseekers is widening.

The Index in a nutshell:

  • 27 countries assessed with strengths and weaknesses of each country’s workforce analysed.
  • Countries are scored between 0.0 and 1.0 – where a score of 5.0 indicates a balanced market for skilled labour; a score of less than 5.0 implies a slack labour market (i.e. few skilled jobs or oversupply of skilled labour); and a score of greater than 5.0 indicates a tight skilled labour market (i.e. insufficient number of skilled employees).
  • Seven factors are considered including, talent mismatch, the local education system’s ability to adapt to the evolution of businesses’ requirements and labour market flexibility.

The Index indicates that most of the countries assessed suffer from labour/workforce issues and do not have stable scores against the indicators used. The reasons for these skills and talent issues stem from different underlying problems inherent in each of the countries. Some of the factors include, ageing workforces (particularly in the case of Japan and Germany), rigid or restrictive immigration policies (a source of real concern in the UK) or lack of sufficient employer and education institutions’ coordination.

In the words of Michael Dickmann, Professor of International HRM at Cranfield School of Management, “When education and businesses don’t coordinate, education can’t adapt.”

There remains an expectations and knowledge gap between what businesses require from graduates of educational institutions and what academics believe businesses need. Another challenge educators and academics face is rapid growth of businesses and their own rapidly evolving needs. It is felt that the immense pace of business growth has outstripped the capacity of local education institutions to meet demand.

The article also provides with a few case studies from the US, the UK, Germany and Japan. Interestingly, the UK has amongst the highest levels of talent mismatch across the countries surveyed. There exists severe skills shortage in sectors from IT to energy to finance. The talent mismatch is being exacerbated through the tightening of immigration rules over skilled workers adding to the UK talent pool.

Japan also has a very high talent mismatch due to a combination of an ageing population, a relatively closed immigration policy, limited diversity and the increasing global demand of Japanese companies.( In a separate article in the Hay’s Journal, reference was made to Japanese firms valuing international perspective amongst jobseekers. In particular, advanced English skills, an interest and ability to adapt to different cultures and accommodate different viewpoints were seen to be very important attributes. They want candidates with a global mindset and firmly believe that this is what is required for both Japanese firms and Japan herself to be successful.)

Germany is also facing challenges in finding skilled staff particularly in view of her ageing population. German companies are turning towards using flexible labour. They are now using open HR structures and work increasingly with freelancers and temporary workers.

It is also noted that in the US that more established and mature firms with developed learning and development functions generally tend to spend a third more on training. In 2012, US businesses spent an average of US$706 per learner (whereas more established companies spent US$867 per learner – or a third more).

The article concludes with a view that no single company, educational establishment, or country has a panacea for this critical issue of global skills shortage. It calls for renewed collaboration between industry, education, and the state to help resolve this challenge.

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