Job shortages or skill shortages?
By Ashok Natarajan
The rapid changes that Arthur Cordell has detailed in his post on the Future of Work have widened the gap between the skills required by the emerging economy and the skills available with the existing workforce. This mismatch has created a severe global skills shortage that prevents full productive employment of the world’s human resources.
OECD Countries
Studies in OECD and developing countries have revealed that alongside the presence of unemployed people there also exists a severe shortage of skilled work force. The missing skills pertain mostly to jobs generated by the new economy. What catches our eyes and attention is the widely publicized demand for IT professionals in the developed countries. But this is only one aspect of a broad range of skill shortages. What is driving the outsourcing of IT jobs to developing countries is really a shortage of skills, not so much a drive to lessen costs as is widely believed. This view was confirmed by a statement of Intel’s Chairman that his company takes its orders to wherever the required skilled labor is available to execute the work.
However, it would be a mistake to assume that skill shortages apply only to the high tech industries. Though they are most prominent and capture our attention, high tech industries employ only 5% of the work force in the United States. The skill shortage is equally applicable for even basic manufacturing industries in the U.S, which have been suffering for years from an acute shortage of labor to carry jobs that pay attractive compensation. In America’s tool and die industry, this shortage is so severe that many of the 10,000 and odd companies in this line increasingly rely on expensive, computer-based machines to do the work or simply outsource the work to overseas suppliers. The association for plumbing-heating-cooling contractors in the U.S.A has reported that finding qualified technicians is a major problem for them. Until the recent economic downturn, the lack of qualified personnel was a major factor impeding the expansion of nonresidential construction market. At present there is a shortage of 126,000 nurses in the U.S and by the year 2020 it is expected to increase to a shortfall of 400,000 nurses and 200,000 doctors in this country.
The situation prevailing in Europe is very similar. A study conducted by International Data Corporation predicted a shortfall of networking skills to the extent of 615,000 personnel in Europe in 2008. Klaus Zimmerman, head of the German Institute for Economic Research (DIW) commented, “We will need more and more immigrants as there is already a dearth of skilled workers—it is a problem that is going to become massively acute in the next 10 or 15 years”. An article in Wall Street Journal in 2007 revealed that there were 600,000 unfilled jobs in Germany, of which 40,000 were jobs for engineers and other skilled people. Another survey revealed that 80% of small firms in Germany find it very difficult to mobilize the skilled labor force that they require. The Cologne Institute for Business Research (IW) has projected that the labor shortage will alarming proportions by the year 2050, as it will be compounded by demographic changes that will shrink the labor force by another 30%. In Austria 42% of enterprises have reported labor shortage for skilled jobs. In the U.K a wide-range of industries have reported difficulties in filling up “hard to fill” jobs that pertain to engineering skills. Roughly two thirds of vacancies at the level of skilled operators and half the vacancies at the level of engineers have been reported as “hard to fill” in this country. This was the situation eight years ago and it can be safely assumed that it would have only worsened since then.
The problem of skill shortage is very much connected to level of education. When the economy becomes more technologically advanced, it compels the labor force to improve their skills in an equal measure. The skills required are not merely physical and technical. Interpersonal and managerial skills are equally important. Unemployment rates are closely connected with levels of education. A study prior to the recession in the U.S revealed that those who did not complete high school had a unemployment rate that was 36% higher than that for those who have completed high school and three times higher than that for college degree holders. This same difference exists with respect to unemployment levels for skilled and unskilled workers. Those aged 19 and under have an unemployment level that is four times higher than those aged 25 and above, who took the effort to improve their skills and enhance their training. The employment rate for people with low-skills is only 49% in Europe, while those with high skills enjoy an employment rate of 83%. The differential gap between these two categories of people is 35 points in Belgium, Ireland, Italy, Finland and the U.K. The employment rate for women with low-skills in Europe is only 37% and especially in Italy it is as low as 27%.
These facts are in line with the argument of Arthur Cordell that the skill shortages caused by the demands of the new economy need to be tackled by new innovative strategies. What is urgently needed is a serious effort to upgrade the level of education and vocational training available to the labor force in both developed and developing countries. One immediate step that can be taken is to increase the minimum mandatory level of education by one or two years, which will delay the entry of youth into the job market and also generate new jobs in the field of education and at the same time make youth more employable.
Developing Countries
The developing countries present a similar situation. India is a good example. Though the nation produces 400,000 engineers annually, corporations are finding it difficult to recruit skilled personnel for their requirements. India’s National Association for Software Companies estimates that by the year 2010 there will be a shortage of 500,000 technology professionals in the country. This skill shortage is not confined to high tech fields either. It cuts across a broad spectrum of industries and covers the low end of the economy as well. Skilled craftsmen such as carpenters, masons, painters and plumbers are commanding higher pay these days simply because the shortage of skilled personnel in these fields has pushed up their wage rates considerably. Fast-developing countries such as India and China need to enhance vocational training across a broad spectrum of industries in order to cope with the demands of the new economy.
Presently some eight million youth enter the job market every year in India in pursuit of jobs. But only 5% of Indian youth in the 20-24 age category receive any type of formal vocational training. This is very low compared to the 28% in Mexico, 60 to 80% in most developed countries and the 96% in Korea. The more trained job seekers are, the more readily the market absorbs them. Conversely, the less trained, the more difficult it becomes to get good jobs and the more expensive for employers to impart the required skill levels. Both the market value and the bargaining power of untrained job seekers is far lower.
India has 4200 industrial training institutes which impart vocational training to nearly 600,000 trainees in 43 engineering and 24 non-engineering trades. If all types of professions are included such as agriculture, medicine and law etc, the total number of trainees is 1.7 million per annum. Still this number represents only 14% of new recruits to the labor force. The country needs other short training courses that people can take at their own time and at lower costs. Moreover those already in employment need training courses to upgrade their skills in tune with developments in their professions.
The deficiency in vocational training covers a very broad range, including basic mechanical skills required for repairing machines to skills required for book keeping, insurance, marketing and journalism etc. Moreover there is plenty of scope for enhancing training in such areas as safe driving, quality control, pollution control and water conservation etc. All this goes to prove beyond a shadow of doubt that India’s problem is not a shortage of jobs but a shortage of employable skills. If the skills are given, people will get the jobs they need or else they can employ themselves.
Recognising this need for vocational training Government of India has recently formed a National Skills Development Corporation to impart skills training to 150 million workers over the next 15 years. The mission of this body is to make sure that by 2022 at least 30% of the work force is properly trained in for employment.
Computerised Vocational training
What has been said above demonstrates that existing arrangements for training are far from adequate to meet the changing demands of the workplace, both in OECD and developing countries as well. The huge size of the global labor force, the complex range of skills required and the high cost of training all make it clear that alternate training methods have to be quickly devised to increase the supply of skills to match the demand. Computerised vocational training is an obvious solution to this problem. Surprisingly, its potential has been largely neglected. It is surprising because computer-based training has long been in use for software training. Video game technology is sufficiently developed to simulate many work-related situations. Computerized flight simulator training has been around for decades. Still the powers of the computer have not been harnessed for imparting vocational training for a number of professions that could benefit by this.
When the value of computer usage is widely recognized in administration, business and formal education, it is intriguing that its use has not been extended to vocational training where it can benefit enormously.
There are many advantages to computer-based learning.
- Multimedia – Computerised courses use written, spoken and graphic materials along with video footage to impart lessons in a manner that cannot be done in a class room.
- Interactive – Students can interact with the program on the spot and get replies and feedback instantaneously and thereby enrich their understanding and enhance their training.
- Paced training – students can acquire the training at their own pace so that it is neither too fast for their comprehension nor too slow to sustain their interest.
- Eliminates need for teacher training – courses are given with the highest possible standards and quality to all students, whereas instructors in classrooms vary enormously in their teaching capacities.
- Response to changing skill needs – course materials can be readily altered in response to changing requirements, which is not the case with textbooks which take time.
- Uniform testing – testing and evaluation will be very uniform as the computer will use only objective criteria.
While in some cases the training offered by computers may need to be supplemented with manual training at the work spot, in the majority of cases what is offered through the computer will be adequate for the purpose. As such computers can be very effective for imparting training in many fields such as commerce, education, entertainment, health and even agriculture. Another advantage is that computer courses will be in demand worldwide and therefore the costs of developing the courses can be amortized over a very large number of trainees, reducing the cost of training per worker substantially.
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