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Updated Dec 20, 2023

The Skills Gap Is Costing Businesses Dearly

Being unable to find employees with the necessary skills is costing companies serious money. Here's how to address the skills gap.

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Shayna Waltower, Business Operations Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Employers are having trouble finding qualified candidates to fill open positions, and this can cost businesses thousands of dollars a year. According to research from Zippia, the average job vacancy costs an employer $4,129 over 42 days. Further, a report by Korn Ferry estimates that the talent shortage could cost businesses across the U.S. $8.5 trillion by 2030. Find out what career experts have to say about the skills gap and the industries struggling the most.

What is the skills gap?

Sometimes, it’s impossible to find a candidate that checks all your boxes. “The skills gap is a term that describes the gaping hole between the requirements of a job and what job candidates possess in terms of professional backgrounds and expertise,” explained Jason Lovelace, former president of talent acquisition solutions at CareerBuilder.

As the job market increasingly focuses on tech skills, employers are having a challenging time finding applicants with the background and experience needed to meet the needs of changing job roles.

“Employers are left with openings that are taking longer to fill than ever before,” said Lovelace. In fact, according to Industry Today, the average time to fill a job position is 42 days. 

Vicki Salemi, a career expert for job search platform Monster, said that the skills gap is similar to the labor shortage; it occurs when employers struggle to find qualified candidates during the hiring process.

Did You Know?Did you know
According to Salesforce's 2022 Global Digital Skills Index, about 75% of people believe they don't have adequate resources to learn the in-demand career skills employers are seeking.

Why is there a skills gap?

Research has pointed to various factors contributing to the skills gap. The most significant cause of the skills gap is linked to the U.S. education system.

  • Degrees are being earned in low-demand fields. Research from the National Center for Education Statistics looked at the 2 million bachelor’s degrees the 2020 graduating class earned. Researchers found 281,000 social science, history and psychology degrees. The problem is that none of these fields are in high demand. 
  • More engineering and science majors are needed. The National Center for Science and Engineering Statistics reported that about 33% of U.S. college degrees are in engineering and science, despite the need for more qualified individuals in these positions.
  • There is a smaller worker pool. A smaller worker pool is also linked to the skills gap. First, post-boomer generations are smaller than previous generations. Additionally, companies have not changed their infrastructure to accommodate the new generation of workers. For example, benefits packages may not include adequate family leave time, paid leave policies or childcare options.

Industries facing the skills gap

Many industries and employers are having trouble filling positions. Still, some industries are struggling more than others, including the tech sector. 

Here are 10 industries most affected by the skills gap:

  • Cybersecurity
  • Machine learning
  • Advanced manufacturing
  • Cloud migration
  • Big data
  • Construction
  • Warehousing
  • Computer technology
  • Electrical engineering
  • Marketing

“As we look at the positions employers are having difficulty filling, we’ve seen that the skills gap is most heavily impacting recruiting across STEM roles and corporate jobs that require technical skills and familiarity with programs,” Lovelace said.

If you're seeking a job in an in-demand IT sector, consider bolstering your resume with InfoSec and cybersecurity certifications or big data certifications.

How the skills gap is hurting companies

Wiley Education Services surveyed more than 600 managers and professionals across various industries. About 55% of respondents said that they believe a skills gap is affecting their organization.

Here are ways the skills gap is hurting companies across the U.S.:

  • Lower productivity: When fewer people are working, less work can be accomplished during each workday. Managers may also have to take time away from their work to help employees who don’t have ideal job skills.
  • Increased performance issues: If an employee lacks many of the skills necessary to accomplish a job, their results might be faulty. Workers must complete their jobs accurately and precisely to ensure products meet a certain standard, especially in technology and manufacturing.
  • Decreased profits: Lower productivity rates and substandard products can quickly result in dismal profit and loss statements. A lack of skilled employees can lead to a business not making the necessary sales to sustain and grow the company.
  • Reduced global competitiveness: Without a skilled team, a company could fall behind competitors in other countries. For example, in Singapore businesses focus on equipping workers with problem-solving and numeracy skills. And Switzerland is already a world leader in innovation.

How do you fix the skills gap?

Many organizations recognize there’s a wide skills gap. Fortunately, business owners and hiring managers can meet this challenge. Below are several ways you and your company can help close the skills gap.

  1. Expand your talent search. Ensure you’re not limiting your employee search to a specific demographic. Consider expanding your search to include nontraditional groups, including older adults, veterans, people with work visas and people with a criminal record. A 2022 working paper released by the National Bureau of Economic Research found that only 39% of companies in the U.S. would hire someone with a criminal record. To help you hire the best employees, consider a diverse talent pool that can bring a wide range of skills and experience – and an enhanced work ethic – to your company.
  2. Offer skill-building courses. Encouraging professional development and offering opportunities for skill-building within your company allow employees to expand their skill sets. These programs can also introduce your employees to new technologies in their fields and decrease knowledge gaps in technical skills.
  3. Partner with colleges for educational opportunities. Sponsoring educational opportunities through colleges can expose more people to STEM programs and help them see the value behind these opportunities. Knowing a company like yours is looking for specific credentials can assure college students that the skills they’re learning can find them work after graduation. You might also offer scholarships to pique interest in completing coursework to obtain technical skills.
  4. Host an internship program. Research by Zippia reported that 70% of interns are offered positions with the same companies where they held their internships. Creating a successful internship program allows you to train interns in the skills they need to become viable job applicants.
  5. Take other factors into account. Salemi relayed what a former corporate recruiter and hiring manager told her: “If a candidate seemed like a great [addition to] the team – hard worker, strong ethics, excellent interpersonal skills, expressed enthusiasm for the role – the [company] would often hire the candidate and provide technical training, as it is more challenging to find [a candidate with the right] technical and tech soft skills.”
  6. Consider alternative educational avenues. Try not to fixate on an applicant’s education, school or degree. Many online resources and training programs can help people develop necessary skills. For example, Codecademy is a platform that offers free coding classes; it’s drawn more than 85 million users to its online courses.
Avoid common hiring mistakes, including not looking at a diverse candidate pool, making snap judgments and not hiring for a cultural fit.

How can you address your own skills gap?

If you’re looking for a job or want to become more competent in your current position, identifying areas to expand your skills can make you a more valuable employee or outstanding applicant. Below are some ways to build your skills and become a more qualified pick for employers.

  1. Assess your skills. Look at job openings in your field, and note any skills requested outside your area of expertise. For example, if employers are looking for SAP experience, consider training programs to advance your career. Performance reviews are valuable tools to measure skills gaps in your current position.
  2. Obtain a form of higher education. About 72% of Wiley survey respondents said that they want applicants to have degrees from colleges or universities. However, 68% of respondents also said trade certificates and experience are highly important among applicants. Another 60% of respondents said they encourage applicants to have industry certifications.
  3. Develop hard skills. According to the Wiley study, computer technology and data analysis skills are two of the most in-demand hard skills. Foreign language fluency, copywriting and digital communication are also desirable skills. Training courses can help you acquire these hard skills.
  4. Refresh your technology skills. Wiley survey respondents said employees should refresh their tech skills at least every two years. This way, they can stay up to date with emerging technology trends and digital programs. “As we look ahead to the next five years, we’re seeing that more jobs across all industries – not just STEM – are requiring tech in their daily tasks,” said Lovelace. “As this trend continues to grow, candidates will need to continue their education and upskilling to meet the requirements of the changing workforce.”

Meeting in the middle

Closing the skills gap requires efforts from employers and prospective employees. Employers must realize applicants might not arrive as a complete package. If you think of applicants as people willing to learn and grow with your company, you’ll open opportunities for them and your company. 

Employees and applicants should consider expanding their knowledge through training programs focusing on essential skills. 

Working together is a win-win for everyone – and a way to slowly but surely close the skills gap.

Adam Uzialko contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.

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Shayna Waltower, Business Operations Insider and Senior Writer
Shayna Waltower is a business journalist with a multimedia background. She spent years doing on-the-ground reporting in local communities from coast to coast before narrowing her focus to helping small businesses nationwide streamline operations, attract customers and improve profitability. Waltower, with her previous experience in storytelling across mediums (broadcast, social media, etc.), enjoys not only producing digestible guides for business owners that break down complex topics but also helping entrepreneurs competently convey their brand stories to consumers. Over the years, Waltower has developed expertise in a number of wide-ranging but critical business areas and topics, including POS systems, workplace management and cybersecurity.
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