What is the Skills Gap and How to Bridge the Divide?
Rapid technological advancements, evolving job roles, demographic shifts, and climate change are some factors driving demand for new skills. The labor market's current capabilities are not meeting the pace at which skill needs are rising. An International Monetary Fund report states that nearly two-thirds of the world's youth do not attain basic skills. In almost 100 countries, only more than half of the youth do not have basic skills.
The skills gap—the mismatch between the skills employers need and those job seekers or employees possess—has become increasingly significant. This disconnect affects productivity, raises costs for businesses due to additional training or hiring needs, and limits employee career advancement.
Continuous learning and adaptation are essential to developing relevant skills in this dynamic global landscape. Fostering a more agile and capable workforce will ensure businesses and employees can thrive in an ever-changing environment.
What is the skills gap?
The skills gap is the mismatch between the skills employers need and the skills workers possess, often driven by rapid technological advancements, evolving industry demands, and insufficient training. These skill imbalances can be due to skill shortages, a lack of relevantly qualified people, skill obsolescence, and over or underskilling. As the gap widens, it results in unfilled job vacancies, reduced productivity, and economic challenges.
The skills gap has significant impacts on businesses, economies, and individuals. For businesses, it leads to reduced productivity, higher recruitment and training costs, and a stagnation in innovation as companies need help finding workers with the necessary technical and soft skills. Economies face slower growth, lower investor interest, rising unemployment, increased income inequality, and diminished global competitiveness. For instance, the World Economic Forum estimates that the worldwide talent shortage could result in an $8.5 trillion loss by 2030 due to unfilled positions and underutilized potential.
On an individual level, McKinsey's James Rappaport suggested that up to 375 million workers worldwide may need to switch jobs and develop new skills by 2030 to meet company requirements. Without the right skills, individuals risk having limited employment opportunities, which can affect their quality of life by reducing financial stability and access to essential services.
Addressing the skills gap requires investments in education and training, promoting lifelong learning, and fostering collaborations between industry and academia. Countries like Singapore proactively address their skills gaps through government initiatives such as SkillsFuture Credit, which provides subsidies for individuals to attend approved courses, and SkillsFuture Work-Study Programmes that integrate learning with workplace experience. Coordinated efforts from governments, educational institutions, and businesses can help training programs for skills in demand, enhancing productivity, innovation, and inclusivity, ultimately benefiting the broader economy and improving individual livelihoods.
Causes of the Skills Gap
Several key factors influence the skills gap, each contributing to the mismatch between the skills needed by employers and those possessed by the workforce.
Technological advancements
Rapid technological progress outpaces the ability of education and training systems to keep up. As new technologies emerge, such as artificial intelligence (AI), machine learning (ML), and advanced manufacturing techniques, the demand for specific technical skills increases, creating a gap between what the workforce currently offers and what employers need. An IBM report stated that executives predict that 40% of their workforce will require reskilling to implement technologies like AI in the next three years.
Educational mismatches
There is often a disconnect between what educational institutions teach and the skills required in the job market. Curricula are often outdated, failing to incorporate industry trends and technologies. An analysis of 11,000 employers by QS Group found that out of 15 essential employability skills, 13 had significant gaps; these include problem-solving, digital, communication, resilience, creativity, and leadership - skills that often fail to be prioritized by educational institutes. Additionally, theoretical knowledge is usually emphasized rather than practical, hands-on skills that are immediately applicable in the workplace.
Changing industry requirements
Industries are constantly evolving, with some sectors experiencing rapid growth and others declining. This dynamic nature of industries means that the skills required can change quickly, leaving workers with outdated skills and creating a need for continuous reskilling and upskilling. For instance, BCG predicts that the skills shortage in the green economy will increase to 7 million by 2030. This shortage is particularly pronounced in crucial areas like solar, wind, and biofuel technologies, which are essential to the shift towards sustainable energy.
Low priority is given to skilling
People tend to avoid investing the time and money required to upskill themselves as they don't see immediate benefits. Companies also often deprioritize skilling initiatives due to short-term financial burdens and undefined returns on investment. Governments also deal with similar situations where short political cycles, tight budgets, and clashing priorities discourage a nation from favoring long-term education reforms.
Conducting a Skills Gap Analysis
Companies can conduct a skills gap analysis by following some critical steps to identify and address the discrepancies between the current skills of the workforce and the skills needed to meet organizational goals.
Here's a structured approach to conducting a skills gap analysis:
Define business or project goals: Define short-term goals like increasing sales or launching products, as well as long-term goals such as market leadership or international expansion to guide strategic decisions and skill development.
Identify key skills: Identify technical skills (like programming or regulatory knowledge) and soft skills (such as communication and leadership) crucial for effective performance and teamwork. Think of skills you value as a company and what skills are needed for employees to do their jobs better now and in the future.
Assess current skills: Assess employee skills through surveys, performance reviews, and formal evaluations to understand current strengths and areas needing improvement.
Identify gaps: Compare current skills with required competencies to pinpoint where individuals or teams lack essential abilities needed for their roles and organizational objectives.
Prioritize gaps: Prioritize critical gaps impacting core functions, urgent gaps needed for immediate tasks, and feasible gaps that can be addressed through training, recruitment, or internal development.
Develop action plan: Develop strategies, such as tailored training, mentoring, recruitment, and internal mobility programs, to address identified skill gaps effectively.
Implement and monitor: Execute the action plan and monitor progress regularly to ensure training, mentoring, recruitment, and internal mobility initiatives are effective and on track.
Evaluate and revise: Evaluate the impact of skill development efforts on business outcomes and employee performance and modify strategies as needed to address new skill gaps and optimize results.
How do we bridge the skills gap?
What governments can do:
National skills mapping
Develop comprehensive skills maps that outline technical and soft skills needed for future jobs. The National Skills Qualifications Framework (NSQF) categorizes qualifications into levels based on knowledge, skills, and aptitude, facilitating alignment of training programs with job requirements. Sector Skills Councils and National Skills Academies define industry standards, ensuring skills remain current and relevant. The Employer Skills Survey assesses national skills needs, while the Skills for Life Survey measures adult literacy and numeracy. Proposed Lifelong Learning Accounts aim to provide individuals with tools to evaluate skills and access training and career information, promoting continuous personal and professional development.
Create a platform to connect stakeholders
Governments can build a comprehensive platform that helps coordinate skill-based and job-focused information between the workforce, employers, and other stakeholders. Transparent access to details like available jobs, skilling programs, scholarships, and funding opportunities can help connect individuals to the right organization, financiers, or government initiatives. Training providers can use such platforms to offer government-accredited programs. In India, the National Skill Development Corporation (NSDC) has launched a platform called 'Skill India Digital' that offers digitally verified credentials and an employment exchange.
Training programs
Governments and businesses can invest in training programs to upskill and reskill the workforce, helping workers acquire the necessary skills. The government offers Skills Bootcamps—short, flexible courses that provide training in in-demand digital and technical skills. Businesses can partner with training providers to offer these boot camps and co-fund the training, with the government covering most of the costs.
What companies can do:
Corporate training accessibility
Expand access to corporate training programs beyond employees to include broader public participation, as seen with AWS and Microsoft Learn initiatives.
Build digital academies
Corporates can build 'digital academies,' a skilling approach considered the most successful in closing the skills gap based on research by the Havard Business Review. Digital academies allow employees across the enterprise to build digital skills through experiential learning to help them transform products, processes, and services. These academies have company culture ingrained within them. Such programs help new employees build foundational skills, knowledge workers develop specific technical knowledge, and managers create awareness about technology's impact across different business areas. Organizations like DuPont and Deloitte have successfully established digital academies to transform their organizations digitally.
Coaching and mentorship
Coaching helps employees learn and improve their roles and ability to perform new tasks by guiding them through the process. Coaching deepens their understanding of the skill set needed. Mentoring, on the other hand, helps an individual learn more about a job and the career options available to them.
Collaborative education
Businesses and educational institutions must work together to design curricula that align with the demands of the job market. This synergy helps training programs incorporate the latest industry trends aligning with organizational needs. Many companies work closely with colleges and universities to develop apprenticeship programs combining on-the-job training and classroom instruction. For example, Rolls-Royce partners with several universities to offer degree apprenticeships in engineering.
Conclusion
In conclusion, the skills gap presents a significant challenge in today's rapidly evolving job market, driven by technological advancements, educational mismatches, changing industry needs, and demographic shifts. This gap impacts businesses through reduced productivity and higher costs, economies face slower growth and diminished competitiveness, and individuals experience limited career opportunities and financial stability. Addressing these challenges requires coordinated efforts from governments, educational institutions, and businesses to upskill and reskill the workforce, align educational curricula with industry demands, and promote lifelong learning.
Partner with us
Join us as a partner at Futurize to spearhead innovation and entrepreneurship programs to generate groundbreaking ideas and businesses for a sustainable future. Get in touch with us by filling out the form below.
