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Fixing the U.S. Skills Gap

Published: January 31, 2023
Who's ready to fix the U.S. skills gap?

Part 1: What the skills gap is and why it matters

This will be a 3-part series covering what the skills gap is, why it matters for today’s youth and for America, and what schools and industry can do to fix it. 

Part 1 introduces the skills gap, why education as it stands isn’t solving the problem, why it matters for youth, and what the impact could be on America.

Reading time: 5 minutes

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Table of contents

    What is the U.S. skills gap?

    There have been waves of technological change in human history, and each one has reshaped the workforce. As industries change and adopt new technologies, the skills needed in those industries change, too—while on the other side of the coin, knowledge and skills are continuously lost from the workforce through retirements or career switching. 

    When there is a mismatch between what skills are needed and what skills are available, we have a skills gap

    This is a growing problem as the population in the US is becoming older, especially as many retired during the pandemic. Companies worldwide are aware that they either already have a skills gap or will have one within a few years. The skills gap is expected to be responsible for an economic loss of $165 billion in the U.S. in 2023, with that number potentially rising to $8.5 trillion over the next decade.

    As an aging population exits the workforce, and, the challenge of filling the skills gap falls on young people—but industry leaders report that entry-level candidates don’t have the skills they’re looking to hire for, and that the problem got worse globally between 2021-2023. 

    This isn’t just a problem for industry. When we don’t give young people the opportunity to develop the skills needed to succeed in the workplace, we cut off the pathways to a secure financial future for them and their family.

    The skills gap reveals problems in our nation’s approach to education, problems that have lead to cycles of poverty for generations—and by not fixing the education system, America could leave itself, and its youth, in very real danger. 

    Reasons for the U.S. skills gap:

    • New technologies emerging (e.g., automation, AI)

    • Aging population/increase in retirements

    • Lack of soft and hard skills in young people entering the workforce

    • Mismatch between education and workforce readiness

    • Lack of upskilling opportunities for current workforce

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    Why the skills gap matters for youth

    Learning begins in schools. The curriculum is designed to teach the basics needed to learn later in life. But, if the skills gap exists, what we’re seeing is the effects of a curriculum that isn’t fulfilling its promise. If the education system is not giving young people the skills that organizations need to keep the nation running, something is off here.

    A high school student graduating in the 50s could earn a decent wage as an unskilled worker, buy a house in the suburbs, afford a car. Now, while a high school graduate can earn a decent starting wage anywhere from McDonalds to Amazon, they will have a low financial ceiling. And, as automation continues to spread, even in the service and hospitality industries, opportunities for entry-level jobs will grow harder to come by. 

    Speaking of Amazon, that company is a great example of how work demands can change. Amazon took the idea of a physical bookstore and made it so people anywhere in the world could browse and buy books from home, which was a problem for physical bookstores. And while that led to a rise in employment in distribution centers, and then delivery drivers, Amazon factories are becoming increasingly automated with robots. Soon, there will be delivery by drones. The people writing the code for those drones and operating them will earn high incomes, but the displaced drivers will have lost theirs altogether.

    As industry continues to change over time, today’s graduates may fall further behind as they have not been taught the skills to keep them nimble enough to adapt to change. They will be left with a financial ceiling that sinks lower and lower as the cost of living and inflation continues to increase over time. Those born into poverty and restricted circumstances will have less chance of breaking the cycle.

    There are already millions of students living below the poverty line in the U.S., with over 5 million children living in deep poverty. Many experience homelessness and mental health challenges. 

    Within each one of these students could lie the drive and creativity to help solve the major challenges facing America. If they are given the chance to learn in a way that works for them, and the support needed to feel safe and confident in growing their own abilities.

    Leaving those millions of students with few options for a route out of poverty is a tragedy. Unfortunately, because of the Coronavirus pandemic and the lockdowns that kept young people out of school, the skills gap is in danger of growing wider.

    Most in-demand soft skills:

    1. Teamwork/collaboration

    2. Communication

    3. Problem solving/critical thinking

    Most in-demand hard skills:

    1. Digital/IT skills

    2. Strategic planning

    3. Operations

    Source: Future of Work, 2022 study, Monster

    A group of students huddled together around a laptop, which glows blue in low light.Digital and collaboration skills are among the most sought-after by employers

    Did the pandemic make the skills gap worse?

    Learning loss is real. A study by Mckinsey found that students were, on average, five months behind in math and four months behind in reading by the end of the 2020-21 school year. Learning loss was worse in schools with historically disadvantaged students, such as those in Black or low-income neighborhoods. Dropout rates increased while those going on to further education decreased. Over a third of parents worried about their child’s mental health.

    The effects of lockdowns could be felt long into the future and worsen the skills gap. The Mckinsey report warns: “Today’s students may earn $49,000 to $61,000 less over their lifetime owing to the impact of the pandemic on their schooling.” That’s the difference between a deposit on a home, or paying off student debt. On the wider economic impact, the report suggests: “The impact on the US economy could amount to $128 billion to $188 billion every year as this cohort enters the workforce.”

    The race is on to make up for that learning loss—but how? The school day is only so long. And there’s another issue: teacher shortages. Most states have reported staff shortages across subjects. Teacher turnover was a problem in the US prior to the lockdowns but increased through the disrupted Covid years due to “increases in teacher retirements and resignations, alongside a limited supply of candidates and a need for more teaching positions.”

    When we need teachers more than ever, there are fewer to be found. Without interventions, learning will surely only widen the skills gap and keep more youth in cycles of poverty. And as the skills gap continues to grow, there could be dire consequences for organizations, too.

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    Why the skills gap matters for America

    The skills gap affects many different industries, from software developers to long-distance trucking, traditional trades such as plumbing as well as cybersecurity teams. The industries most affected by the U.S. skills gap are manufacturing (30%) and technology (21%)

    All these jobs require people to learn the skills necessary to complete the work competently—hospitals need running water just as much as they need secure digital systems to hold our medical records.

    But the way education is currently set up is that a bachelor’s degree is seen as an all-or-nothing target, even though student debt is a huge problem for many. 

    Standardized testing, and the targets schools are set, does little to actually help young people figure out the best pathway for them—or help with job supply and demand. Schools are scored based on things like student attendance, grades, how many of their students graduate, and how many go on to further education. The experience students receive on their way through the education system is not measured. Neither is their contribution to industry.

    Of course teachers and school districts want their students to learn more than just the curriculum at school, but there are few incentives in place for them to offer more—and resources such as time and staff numbers are limited.

    All levels of work, and most aspects of life even, require a core set of generic skills to navigate successfully. We’re talking mindset skills—foundational skills that make the fine-tuning skills needed for any occupation. These foundational mindset skills include critical thinking, problem-solving, project management, collaboration, learning how to learn, resilience (or grit), and creativity. But there is no measure of these skills in the education system—and no requirements to teach them.

    These foundational mindset skills allow young people to navigate whatever life throws at them, and give them an adaptable toolkit to make good choices that let them fully explore their personality and interests. 

    When it comes to fixing the skills gap, young people, equipped with these foundational mindset skills, have the ability to adapt to a changing workplace—and we can cultivate more innovative young minds that can help solve the major problems facing society.

    What matters most is giving as many young people as possible access to learning these foundational mindset skills. 

    So, how do we do that?

    We’ll cover approaches that can help fix the skills gap in Parts 2 and 3!

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    A Work ED teaching assistant high-fiving an elementary age student who is sat behind a laptop.We'll explore how to fix the skills gap and give youth a chance over the next instalments!