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Skills Gap: Reality or Myth?


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Skills gap: reality or myth?
The presumed mismatch between the skills of the workforce and the needs of employers, commonly referred to as the “skills gap,” has garnered the attention of politicians, employers, economic developers, and professionals in workforce and education. A number of authoritative sources—Manpower, Deloitte, McKinsey—point to statistics which show that, despite relatively high levels of unemployment, a number of jobs are going unfilled because employers can’t find candidates with the skills they want. This issue will be the subject of discussion led by TIP’s president and CEO, Tom Stellman, at the Texas Economic Development Council’s 2013 Legislative Conference this week. Get a preview of his slides here.

Several factors are contributing to this gap, including an aging workforce, an education system focused on 4-year degrees, the growing use of automation, and distortions caused by the labor demands of the energy sector. Yet some argue the current situation is less of a “skills” gap than a “wage” gap. Manufacturing wages have stagnated as the value of goods produced per worker has soared. This lackluster performance can make it even harder to attract young workers to manufacturing careers, particularly in a culture that often perceives the industry as a less–than-desirable option for its children.

Even if we could agree on its existence, the question of how best to fill it remains. Focusing on education is at the heart of many initiatives. Yet even if education is the answer, the challenges of timing the flow of workers with the needs of industry remains. Trying to predict which skills will be in demand can result in well-meaning training programs that produce a number of workers in a particular industry only to find that the economy has moved on and left these newly minted skills in the dust.

So, reality or myth? Maybe, like many of life’s questions, the answer is a little of both.

NOTE: The Geography of Jobs slide is a data visualization- go to to see the animation.

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Skills Gap: Reality or Myth?

  1. 1. Texas Manufacturing Skills GapA presentation to the Texas Economic Development CouncilTIP Strategies | Tom Stellman, president & CEO | February 28, 2013
  2. 2. Agenda• About TIP• Relevant trends• Manufacturing trends• Skills gap in the spotlight• Responses
  3. 3. Based in Austin, TexasHelping clients with economic & workforce development analytics & strategy 3
  4. 4. Our experience We have 17 years of experience in over 100communities, across 29 states & 4 countries
  5. 5. Geography of Jobs
  6. 6. Total unemployed in the US TOTAL UNEMPLOYED, 16 YEARS AND OVER Nov 2012 in Millions, Seasonally Adjusted (preliminary)16 12.0814 million unemployed121086420 1950 1960 1970 1980 1990 2000 2010 Source: U.S. Bureau of Labor Statistics (Current Population Survey).
  7. 7. Educational attainment of the labor forceage 25 years and over Share that has earned at least a bachelor’s degree Share that does not have a 4-year degree Source: US Bureau of Labor Statistics (Current Population Survey).
  8. 8. 10.0% 5.0%Peak unemployment Peak unemploymentrate for the share of rate for the share ofthe labor force over the labor force over25 without a four- 25 that has earnedyear degree at least a bachelor’s degreeSource: US Bureau of Labor Statistics (Current Population Survey). Unemployment for those without a 4-year degree peaked in Oct 2009;unemployment for those with a 4-year degree peaked in Sept 2009.
  9. 9. The tightening labor marketGROWTH OF THE WORKING AGE POPULATIONProjected net annual change for the US population age 18-64 2,250,000 projections 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 2005 2010 2015 2020 2025 2030 2035 2040 Sources: US Census Bureau, estimated (2005-2011); projected (2012-2040) .
  10. 10. The view for TexasGROWTH OF THE WORKING AGE POPULATIONProjected net annual change for the TEXAS population age 18-64600,000 projections 500,000400,000300,000200,000100,000 0 2005 2010 2015 2020 2025 2030 2035 2040 Sources: US Census Bureau, estimated (2005-2010); projected (2011-2040) .
  11. 11. Manufacturing trends
  12. 12. Since 1970,total US employmentin manufacturinghas fallen by 7 million
  13. 13. INDUSTRY SHARE OF TOTAL US GDP, 1970-201030% This chart provides greater context for employment changes by comparing25% the share of all jobs in the US Manufacturing Financial activities20% Trade, transport & utilities15% Government10% Health services Prof. & business services5% Leisure & hospitality0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 SOURCE: U.S. Bureau of Economic Analysis
  14. 14. US manufacturing trends | Productivity increases have yielded steady output with fewer and fewer jobs Jobs (in millions) Shipments (in $ trillions)* Value of Shipments per Worker* $550,00020 $6 $500,00018 $5 $450,00016 $400,00014 $4 $350,00012 $300,00010 $3 $250,000 8 $200,000 $2 6 $150,000 4 $1 $100,000 2 $50,000 0 $0 $0 1977 2011 1977 2011 1977 2011SOURCE: U.S. Census Bureau, Economic Census and Annual Survey of Manufactures (various years)*inflation-adjusted (2011 dollars)
  15. 15. Total manufacturing jobs (in millions) US Texas ~900k ~12.5 mSource: EMSI Complete Employment – 2012.4; TIP Strategies.
  16. 16. Two different views Manufacturing Manufacturing As a share of total employment Employment relative to 2002 Texas US Texas US 12.0% 1.2As a share of total employment 10.0% 9.6% 1.1 8.0% 7.0% 1.0 2002 = 1.0 8.1% 0.92 6.0% 0.9 6.0% 0.80 4.0% 0.8 2.0% 0.7 0.0% 0.6 2002 2004 2006 2008 2010 2012 2008 2010 2002 2004 2006 2012 Source: EMSI Complete Employment – 2012.4; TIP Strategies
  17. 17. Skills gap?
  18. 18. In the spotlight
  19. 19. « As many as 600,000 jobs are going unfilled … at the same time the national education curriculum is not producing workers with the basic skills manufacturers need. » A survey of 1,123 manufacturing executives conducted by Deloitte and The Manufacturing Institute, October 2011.
  20. 20. 52 percent of US companiesstruggled to fill key jobs in 2011 According to ManpowerGroups 2011 Talent Shortage Survey, the highest percentage in the six-year history of the survey
  21. 21. Top 10Hard-to-Fill Jobs:• Skilled trades• Engineers• IT staff• Sales representatives• Accounting & finance staff• Drivers• Mechanics• Nurses• Machinist/machine operators• Teachers
  22. 22. Recruiting challenges | 2011 SHRM Poll % of respondents having a difficult time recruiting for specific job openings 0% 20% 40% 60% 80% High-Tech 71% Manufacturing 68% Professional services 59% Overall 52% Construction, mining, oil and gas 51% Health 50% Finance 49% State and local government 33% Federal government 31%Source: Society for Human Resource Manager. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps. Survey of 2,286randomly selected SHRM members in eight industry sectors. Recruiting challenge questions asked only of respondents whose organizations werecurrently hiring full-time staff. Figures represent share of respondents expressing an opinion; “don’t know” responses were excluded.
  23. 23. Hard-to-fill occupations | All industries 0% 20% 40% 60% 80% 100% Engineers 88% High-skilled medical… 86% High-skilled technical… 85% Scientists 83% Managers and executives 78% Sales representatives 72% Skilled trades (e.g., electricians, carpenters 68% Accounting and finance professionals 54% Production operators 52% HR professionals 49% Drivers 36% Customer service representatives 34% Hourly laborers 29% 2011 SHRM Poll Administrative support staff 24%Source: Society for Human Resource Managers. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps.Note: N=104-610. Chart represents the job categories in which survey participants found recruiting "Somewhat difficult" and “Very difficult.” "Not applicable" responses wereexcluded from this analysis. Only respondents whose organizations were having a difficult time recruiting for certain types of jobs were asked this question. 23
  24. 24. Hard-to-fill occupations | Manufacturing 0% 20% 40% 60% 80% 100% High-skilled technical… 89% Engineers 88% Skilled trades (e.g., electricians, carpenters 83% Managers and executives 80% Sales representatives 74% Scientists 72% HR professionals 64% Production operators 56% Accounting and finance professionals 50% Hourly laborers 39% Drivers 38% Customer service representatives 28% 2011 SHRM Poll Administrative support staff 17%Source: Society for Human Resource Managers. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps.Note: N=104-610. Chart represents the job categories in which survey participants found recruiting "Somewhat difficult" and “Very difficult.” "Not applicable" responses wereexcluded from this analysis. Only respondents whose organizations were having a difficult time recruiting for certain types of jobs were asked this question. 24
  26. 26. 1 in 5 workers is 55 years or older Age distribution of Age distribution of US mfg. workforce Texas mfg. workforce 65+ Years 3.8% 65+ Years 4.6% 55-64 Years 18.7% 55-64 Years 17.5% 45-54 Years 30.1% 45-54 Years 28.6% 35-44 Years 23.6% 35-44 Years 23.9% 25-34 Years 17.4% 25-34 Years 18.5%Less than 24 years 6.3% Less than 24 years 6.8% Source: EMSI Complete Employment – 2012.4; TIP Strategies
  27. 27. Today’s manufacturing isless likely to look like this ….
  28. 28. And more likely to look like this …
  29. 29. Skills gap … or wage gap?US MANUFACTURING EMPLOYMENT TRENDS, 1940 to 2012Production and nonsupervisory employees (left) and inflation-adjusted ave. hourly earnings (right) 20,000 $25.00 Average hourly earnings of production and non supervisory employees (2012 dollars)Number of production and nonsupervisory 16,000 $20.00 employees (in thousands) 12,000 $15.00 8,000 $10.00 4,000 $5.00 0 $0.00 1955 1995 1940 1945 1950 1960 1965 1970 1975 1980 1985 1990 2000 2005 2010Source: US Bureau of Labor Statistics, Current Employment Statistics
  30. 30. Deep thoughts this week: 1. There is no skills gap. 2. Who will operate a highly sophisticated machine for $10 an hour? 3. Not a lot of people 4. As a result, there is going to be a skills gap.By Adam DavidsonPublished: November 20, 2012
  31. 31. Failure to pass HR screening Table 4. Positivity Rates By Testing Reason - Urine Drug Tests For General US Workforce. Based on >4.8 million tests from January to December 2011TESTING REASON 2007 2008 2009 2010 2011Follow-Up 7.7% 7.6% 7.5% 6.5% 6.6%For Cause 19.2% 22.0% 26.8% 26.9% 26.8%Periodic 1.4% 1.4% 1.5% 1.3% 1.3%Post-Accident 5.8% 5.6% 5.3% 5.3% 5.3%Pre-Employment 3.9% 3.6% 3.4% 3.6% 3.5%Random 5.7% 5.3% 5.4% 5.3% 5.2%Returned to Duty 5.6% 5.3% 4.6% 5.2% 5.2%Source: The Drug Testing Index © 2012 Quest Diagnostics Incorporated. All rights reserved. The Quest Diagnostics Drug Testing Index is published as a publicservice for government, media and industry and has been considered a benchmark for national trends since its inception in 1988. It examines positivity rates - theproportion of positive results for each drug to all such drug tests performed - among three major testing populations: federally mandated, safety-sensitive workers;the general workforce; and the combined US workforce.
  32. 32. The Geography of Drug Tests?Overall Positivity by 3-Digit ZIP CodeUrine Drug Tests | January to December 2011
  33. 33. Disruptions | Shale plays
  34. 34. Top 35 Occupations: Total impacts (direct, indirect and induced) 2011 Occupations impacted in 14 producing Eagle Ford Shale counties: SOC Share Code Occupations impacted Number of total Total 14-county impact 38,000 100.0% 1 53-3032 Truck drivers, heavy and tractor-trailer 1,864 4.9% 2 47-2031 Carpenters 1,192 3.1% 3 47-2061 Construction laborers 1,127 3.0% 4 47-2073 Operating engineers and other construction equipment operators 1,036 2.7% 5 43-9061 Office clerks, general 969 2.5% 6 47-1011 First-line supervisors/mgrs of construction trades and extraction workers 914 2.4% 7 41-2031 Retail salespersons 811 2.1% 8 43-3031 Bookkeeping, accounting, and auditing clerks 748 2.0% 9 11-1021 General and operations managers 712 1.9% 10 53-7062 Laborers and freight, stock, and material movers, hand 705 1.9% 11 41-2011 Cashiers, except gaming 689 1.8% 12 13 Labor force impact | Eagle Ford Shale 53-7032 Excavating and loading machine and dragline operators 49-9042 Maintenance and repair workers, general 685 596 1.8% 1.6% 14 43-6014 Secretaries, except legal, medical, and executive 575 1.5%Source: Workforce Analysis for the Eagle Ford Shale, October 2012, prepared by Center for Community and Business Research at the University of Texas at San Antonio’sInstitute for Economic Development. Counties included in analysis: Atascosa, Bee, DeWitt, Dimmit, Frio, Gonzales, Karnes, La Salle, Live Oak, Maverick, McMullen, Webb, 15 43-6011 Executive secretaries and administrative assistantsWilson, and Zavala. 564 1.5%
  35. 35. Responses
  36. 36. « [I]nitiatives in manufacturing, energy, infrastructure, hou sing all these things will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also » equip our citizens with the skills and training to fill those jobs. President Obama 2013 State of the Union
  37. 37. • Manufacturing Innovation Institute Network. One-time $1 billion investment to create a national network of 15 mfg. innovation institutes. • Community College to Career Fund. $8 billion to forge new partnerships between community colleges and businesses to train 2 million workers. Supports “pay for performance” strategies. • Manufacturing Technology Acceleration Centers. $25 million to launch industry- specific centers that can serve as a coordination point within key supply chains.Investing in Manufacturing proposals 2013 State of the Union Address Source:
  38. 38. Statewide business coalition. “Pushing bills that would loosen high school graduation requirements and foster better career and technical training” (AAS – 2/16/2013) SB3, carried by Ed. Committee Chairman Dan Patrick, R-Houston would: • Create single HS diploma (currently 3 graduation plans – minimum, recommended, and distinguished) • Relax 4x4 standards (e.g., substitute diesel mechanics for required science) • Increase CTE83rd Texas Legislature Statewide
  39. 39. TAM priorities for 2013 session: • Energy affordability and reliability • Critical infrastructure, esp. water • Taxation on capital intensive businesses • Preserving tort reforms • Efficient permitting process • Education system flexibility • Incentivizing R&D activity • Business attraction and retention.Texas Association of Manufacturers Statewide
  40. 40. • Industry-driven (initiated by Toyota)• Focused (single, high-impact industry)• Scalable (grew from quickly from single state – KY– to multiple states)• Private-sector engagement (members were required to bring partner to the table with them)• Outcomes-based (program has common set of standards to assess student success; part of NSF’s Advanced Technological Education Centers program)Automotive Mfg. Technical Education Collaborative (AMTEC ) Multiple states |
  41. 41. • Skills-focused (goal to create pipeline of workers for automotive and advanced mfg. employers with skills in automated control systems, robotics, and mechatronics and other industry needs)• Multiple industry partners (members include range of automakers and suppliers)• Outreach model (begins in secondary system to attract, enroll, and graduate a diverse population of students )• One of 39 regional Advanced Technological Education (ATE) Centers under the National Science Foundation’s ATE Program. Consortium for Alabama Regional Center for Automotive Mfg. (CARCAM) Alabama |
  42. 42. Advanced Technological Education (ATE) Centers In Texas CONVERGENCE TECHNOLOGY CENTER Collin College | Frisco NATL. CENTER FOR OPTICS CENTER FOR THE AND PHOTONICS EDUCATION ADVANCEMENT OF PROCESS Univ. of Central Florida | Waco TECHNOLOGY College of the Mainland |Texas City NATL. GEOSPATIAL TECHNOLOGY CENTER OF EXCELLENCE Del Mar College | Corpus ChristiBased on
  43. 43. • Industry-initiated (group of 5 advanced manufacturing companies) • Scalable (expanded to include > 15 cos.) • Targeted at specific occupational shortage (CNC machinists) • Tailored curriculum (Tarrant County College used existing funds to purchase equipment needed to simulate desired work environment) • Multiple funding approaches (College equipment, state and federal grants, private sector donations of time and expertise) • Outreach (“Gotta Make It” video available to local students on DVD and via YouTube)Advanced Manufacturing/ CNC Consortium Fort Worth area
  44. 44. Industry-driven partnership. Includes cities (SanAntonio, New Braunfels, and Seguin), The AlamoColleges, school districts, chambers of commerce,Port of San Antonio, Workforce Solutions Alamo andlocal employers. Designed to create bridge betweenK-12 and post-secondary systems.Focused on building pipeline. Graduates of2-year program earn 31-34 college semester hours atno personal cost and receive a Level I Certificate ofCompletion through the Alamo Colleges along withhigh school diploma.Offered via four academies:• Aerospace• Information Technology & Security• Advanced Technology & Manufacturing• Health Professions Alamo Area Academies San Antonio area |
  45. 45. Critical labor shortages. Initiative isdesigned to address critical shortages in themanufacturing and energy industries.Industry-driven. Fox Tank Company in KerrCounty partnered with Alamo Colleges tocustom-train 135 new and current workers inbasic and advanced welding.New facility. Training will be offered at40,000 square foot state-of-the-artWorkforce Center of Excellence openedNovember 2012.Skills Development Fund. Training isfunded through a $304,848 grant from theTexas Workforce Commission. Customized Training – Basic & Advanced Welding Skills Development Fund award | Kerr County“Teaming up for Kerrville,” Hill Country Community Journal
  46. 46. Industry partnerships. Customized trainingprograms for careers in oil and gas, alternativeenergy, or mechanized (automated) productionfor corporate partners(e.g., Haliburton, Anadarko, and Baker Hughes)Response to “The Big Crew Change.” 2011study* points to “outflow of more than 22,000senior key petro-technical professionals (in theenergy and production industries) by 2015.”State-of-the-art facility. Focused on technicaland engineering skills required by industry.Construction of 80,000 square-foot dedicatedfacility approved in Sept. 2012. Lone Star College Energy & Manufacturing Institute Houston area*Study conducted by Schlumberger Business Consulting as cited in
  47. 47. Parental involvement. Initiative designed to increase involvement of Hispanic parents in their children’s education. Early intervention. Started with 5th grade. Designed to keep parents involved as kids make critical transition into middle school. Focused on improvement in four areas: parent-teacher communication; at-home engagement (e.g., helping with homework); home learning environment; and parental volunteering at school. Data driven. Worked with E3 Alliance, a regional, data-driven education collaborative based in Austin.Latinos Educated and Dedicated (LEAD) Austin area | Hispanic Austin Leadership
  48. 48. • Pharr-San Juan-Alamo (PSJA) ISD focused on improving HS graduation rates. Completion rate has increased from 62.4% in 2007 to 86.7% in 2010• College, Career & Technology Academy. “Dropout recovery” program for students between 18-26 years of age who lack high school credits and or exit exams to graduate. Since the CC&T Academy opened in• Countdown to Zero campaign. Door-to- 2007, close to 1,000 students have door approach to invite non-completers to received their high school diploma return to school, coupled with preventive and have been connected to post- work at PSJA ISD campuses to ensure secondary education, 212 of those students that are falling behind are caught up students over the age of 21. and graduate on time. Career & Technical Academy Texas Lower Rio Grande Valley
  49. 49. thank you. 49