Why aren’t rich companies and highly skilled candidates a match made in heaven?

By Maria Dahl, Junior Consultant at the Organisation for Economic Co-operation and Development (OECD), Paris

A solution to the alleged skills mismatch between labour supply and demand 

The so-called ‘unskilled Generation Y’ might not be so inadequate. On-the-job training has almost completely disappeared in the last 30 years, which could help to explain the alleged supply shortage of talented job candidates. New hires cannot be expected to know how to perform their jobs perfectly from the start. This unrealistic expectation is leading to a large amount of wasted talent.

Rich companies and highly skilled candidates should be a match made in heaven. But unemployment rates are acute among highly skilled young professionals. There is much debate about what is behind this phenomenon. Some think we are experiencing a talent shortage, whereas others believe our university education no longer teaches the soft skills the work force demands. A survey by York College of Pennsylvania’s Centre for Professional Excellence found that 40% of faculty think less than half of their students demonstrate professionalism and yet evidence shows there has been no decrease in skill levels since 2008. These arguments seem to miss the fundamental issue: the hiring process seeks professionals with an exact skillset needed for the job. Managers are unwilling to train new employees so that they are adapted to their business environment. They complain the fast pace of modern business means they do not have enough time.

Companies used to offer trainee programmes and teach the skills necessary to do the job. The recession is partly to blame for this shortage of training as companies’ budgets thinned, making managers insecure about their own positions and the future of their businesses. Others argue information technology has enabled employers to buy skills rather than make it themselves. This puts young professionals in a disadvantageous position as they lack the experience of older candidates. A vicious cycle is created, whereby the young cannot attain jobs due to lack of experience – but this will continue to be the case if they are not hired.

A survey last year by recruitment firm Manpower found that 24% of employers complained about young applicants’ lack of experience and work attitudes. However, companies have failed to react by offering training programmes that improve young candidates’ potential. Only some 33% of European-based employees received workplace training in 2010. In fact, most in-house training programmes at manufacturers have disappeared in the last 30 years. Inefficient recruitment and training strategies better account for the problem than a global talent shortage.

Low labour demand has led to recruitment tactics that include waiting for the perfect candidate rather than providing training. Recruiters know highly-skilled candidates are in oversupply (40% of the unemployed were previously in high-skilled or skilled non-manual jobs), incentivising many of them to ask for higher educational requirements than necessary for the job (PIAAC data). Companies can choose to leave a post unfilled for months before finding the ideal ‘ready-skilled’ candidate, instead of hiring someone who is less than perfect and train him or her.

It’s easy for companies to blame universities for poor training, but it depends on how we define universities’ role in society. In a capitalistic society, it is rational for companies to want to shift training costs to the public sector. This argument moves the debate away from cash-rich companies who decline to hire and the need for fiscal stimulus policies to increase wages, employment and workplace training. Rather, it centralises the debate around the alleged need to ‘fix’ people. But since companies inevitably know more what they need from their employees, is it not more efficient for them to invest in training?

Assuming that new hires will have all the necessary skills from the beginning is unrealistic. Employers should realise that learning opportunities are vital as they can lead to positive spillover effects on the value chain’s overall competiveness. Adequate training can improve employee satisfaction, as individuals feel challenged. This incentivises them to stay longer in the job, lowering a company’s overall training costs. It’s win-win.

How do we solve this problem? Companies should be encouraged to discuss what skills their future employees need to have with universities. And governments should give incentives for companies to train their staff sufficiently.

Public policy initiatives to encourage effective traineeships include this directive drafted by the Council of the European Union in March 2014, highlighting the role of traineeships as an entry point into the labour market for young professionals. Private sector schemes include the Siemens engineering plant in Berlin that offers traineeships for graduates, training them in soft skills such as teamwork and problem solving. Other low-cost options are becoming available through simulation games that teach users to improve supply chains and customer services, such as IBM’s INNOV8. Smaller firms can meanwhile train their employees through more affordable online courses. For example, FernUniversität, Germany’s state funded distance-learning university, has 90,000 online learners (with some of those based in Russia and Hungary).