The Growing Skills Gap

Know someone out of work? With the unemployment rate lingering at 8.5 percent nationally, the surprising fact is, in the last six months, a large portion of the 3.5 million job openings across the country have gone unfilled for months. How does this jibe with the reality that 40 percent of the unemployed have been without work for a year or longer?

Blame it on a skills gap. It’s an international problem that has hit the United States hard. And, like everything else about the Great Recession, Arizona’s skills gap issue is magnified even more, especially in the management, science, technology, engineering and manufacturing sectors.

It’s a talent mismatch that has economic and workforce development professionals scrambling to find solutions. Compounding the problem here in Arizona is the fact that the dominant industries prior to 2008 — hospitality, services, tourism and construction — are being replaced by industries requiring a different and higher-level skill set. And then there’s education. In Arizona, 78 percent of the unemployed have no post-secondary education, and 40 percent of Arizonans over the age of 25 have a high school education or less.

An Alarming Wake-up Call

Patrick Burkhart is the assistant director of Maricopa County Human Services Department, Workforce Development Division. He oversees Maricopa Workforce Connections, a program designed to develop a competitive work force and reduce the number of public assistance recipients in Maricopa County. Burkhart’s wake-up call to Arizona’s alarming skills gap issue came in February 2011 when he reviewed the results of a study his office had commissioned through Arizona State University’s Center for Health Information and Research. “It hit me over the head,” he says. “We had been conducting annual studies relating to healthcare, but this time we expanded our questions to get a much broader picture.”

The broader picture jolted Burkhart into action. He immediately went to work to assess just how serious the skills gap problem in Arizona not only is but will be. “On a national level, we tend to be focused on what skills will be in demand 12 to 18 months from now, when we should be looking at five years and beyond. If the present trend continues, by 2020, there will be an excess of 6 million low-skill and low-education workers and a shortage of 1.5 million college-educated workers,” he says.

Industries with the largest skills gap are limping along trying to find qualified workers. A recent McKinsey report revealed that 64 percent of companies surveyed can’t find qualified applicants for management, scientific, engineering and technical positions. In Arizona, 76 percent of Arizona technology companies report that it is either very difficult or somewhat difficult to find qualified applicants for computer science, engineering and technical positions. And the findings of a National Manufacturing Institute survey are just as sobering: 67 percent of employers report a moderate to severe shortage of available qualified workers, and 56 percent expect this shortage to become more severe.

Sherman Jennings is chair of the Governor’s Council on Workforce Policy and Human Resources Site Leader at Boeing. In his role with the GCWP, he provides guidance to the Governor and the state legislature regarding workforce development issues. He also manages the GCWP’s responsibilities for making policy decisions for the operation of the local workforce system statewide. “This is a critical issue for Arizona’s future. To attempt to quantify it does not address the core issue of why this problem exists and, more importantly, what plans are in place and being developed to address the skills gap. The ability to provide ready-to-employ citizens is central to the ability of Arizona to attract and retain employers that will enable Arizona’s future,” Jennings says.

A Work Force of ‘Left Behinds’

Did we mention the fact our work force is aging? Approximately one-third of our national work force is age 55 or older. Because of current economic conditions, most plan to work past retirement age. But once the economy stabilizes, they will exit in droves. “Between 2015 and 2020, they are going to vamoose — and all at once,” Burkhart says.

So, who is left behind? It’s a mixed bag of older and younger workers, some of whom are credentialed but not necessarily experienced. Most will have transferable rather than precise skills and experience. The majority will have a low skill set and little education. Also making up the majority of our work force: people with disabilities, veterans, people with poor credit, long-term unemployed and people with prior legal offenses.

Arizona Public Service is already preparing for a mass exodus of workers who will retire. “Like the rest of the utility industry, APS is facing increased workforce retirements over the next five years,” says Lori Sundberg, APS senior vice president, Human Resources and Ethics. “Today, 25 percent of our employees are eligible to retire, and by 2014, the percentage will jump to 43 percent. At the same time, energy technology continues to evolve, whether we’re talking about renewable energy or smart meters. That means we’re looking for different skills in some areas.”

Elaine Babcock serves as the vice chair for the GCWP. As manager of the Southern Arizona Human Resources department of Southwest Gas Corporation, she says the skill set required to do jobs has been changing since long before the recession. “If we think about this broadly, our business has changed dramatically over the years using technology. For example, our construction crews have computers on their trucks, and we include computer skills in our recruitment process for construction workers,” she says.

Babcock’s colleague, Betty Gudeman, manages Southwest Gas’s Central Arizona Human Resources division and worries about what will happen when the economy stabilizes. “Once job seekers find their ideal jobs and unemployment rates go down to 4 or 5 percent, we may see a slight shift in the candidates looking for work,” she says.

Developing a Talent Pipeline

Back to the “left behinds” — how do we train them so they get into the hiring pipeline?

Barry Broome, president and CEO of the Greater Phoenix Economic Council, says it is important to understand why so many companies are finding it difficult to recruit qualified workers. “Much of the high-end, management-level talent has been absorbed. For those workers who are left behind, there is a lack of understanding what skills are transferable. In addition, there is an insufficient pool of employees having two to five years of specific experience.” He calls Phoenix a high-growth, big-bandwidth market, and notes another challenge is many people are eager to work but are used to high wages for semi-skilled jobs. “This is what happens when the market contracts. We end up with a gap.”

Recognizing that education is vital in solving the skills gap issue, Broome says GPEC is working with other like-minded organizations to evaluate better programs geared at developing a talented pool of skilled workers. “We’re assessing the region’s training programs and placing an emphasis on working with our community colleges. There are more than 260,000 community college students in the Phoenix metropolitan area … among the highest concentration of students in the nation.”

More college graduates will help. By 2018, 61 percent of all jobs in Arizona will require some postsecondary training beyond high school. And within the next 10 years, nearly 170,000 Arizona jobs requiring a Bachelor’s degree will become vacant due to retiring Baby Boomers.

Tom Anderes, Ph.D., is president of the state’s public university governing system, the Arizona Board of Regents, and co-chair of Getting AHEAD (Access to Higher Education And Degrees), a special project that was created three years ago from a $1.5 million grant from the Lumina Foundation for Education. Arizona was one of seven states to receive grant funds. He notes, “The intention is to put universities and colleges in a position to provide a wider array of postsecondary education that is more accessible and affordable. At one time, the U.S. ranked at the top of the world in college completions, but now we’re ranked 12th, and that number continues to drop. In addition, Arizona is substantially behind the U.S. [average] in the number of high school graduates who pursue postsecondary education, ranking 45th nationally.”

The four-year grant has enabled the Getting AHEAD project to develop innovative new partnerships between community colleges and Arizona’s three public universities to fundamentally change the enterprise of higher education so that more residents can complete associate and bachelor’s degrees. “We’re working to open up more pathways for students. All of the community college and university presidents now meet quarterly, whereas there was no vehicle for them to do so in the past,” Dr. Anderes says, adding, “We have also developed performance funding, and advising and career planning is now more student-centered.”

Recognizing the need to start early, Getting AHEAD recently launched a high school online portal, aztransfer.com, that helps students, parents and K-12 administrators and advisors identify the graduation requirements students need to complete in order to be accepted into a university. “It’s a great resource to help young people who may be uncertain about their future or less motivated,” Dr. Anderes says.

The Getting AHEAD grant has also enabled colleges and universities to create an Enterprise Plan. “It is broad strategic direction of where we want to go. There is much more to what we’re trying to do,” Dr. Anderes says. Four goals represent the foundation of the universities’ Enterprise Plan and the basis for the decisions made in the future: access and excellence, research excellence, work force and the community, and productivity. “Increasing access and seeing more residents with a degree will contribute to the growing workforce demands, while increasing our research base will contribute to a stronger economy locally and across the state,” he says. The plan has 32 different metrics that will help assess their progress on the goals while their funding will be driven by university success in attaining annual targets. “Our level of improvement will be transparent and apparent to all those interested in our impact on individuals, communities and the state.”

On the corporate side, more companies in need of skilled labor are increasing their support of education. APS’s corporate giving is focused on supporting STEM (science, technology, engineering and math) programs throughout Arizona. “We are focusing on building our talent pipelines, planning for retirements, ensuring we identify and transfer critical knowledge and strengthening our capabilities in workforce planning, data and analysis,” Sundberg says. “We want to be able to hire men and women from across Arizona for jobs as line workers, accountants, plant operators, electricians, power engineers, security officers, IT specialists and many more.”

Through the new Arizona Energy Workforce Consortium, the state’s utility companies and electric cooperatives are working with educational and governmental entities to build talent pipelines and create a greater awareness of energy jobs in Arizona. APS also is one of only five utility companies nationwide piloting the Troops to Energy Jobs program, sponsored by the Center for Energy Workforce Development. This program focuses on helping military veterans transition into jobs in the energy industry, offering skills testing, career coaching and an online application process.

“We also are working collaboratively with the Maricopa Community Colleges that offer specialized training for the energy industry. For example, Estrella Mountain Community College works closely with our Palo Verde Nuclear Generating Station and has launched the Get Into Energy Program this semester,” Sundberg says. The program provides scholarships to high school students who want to learn the skills needed for the energy industry. APS also works with Chandler-Gilbert Community College, which offers an Electric Utility Technology Program. In addition, APS sponsors an internship program, and employed nearly 100 college students in summer and year-round internships last year.

Boeing is also taking a proactive approach to finding and developing skilled labor. “Education is the key to addressing this critical issue,” says Jennings. “The education system of Arizona needs to be in sync with preparing its students with the current and emerging needs of its present and future employers.” Boeing has increased its outreach efforts at all levels of the education and employment spectrum to include mentoring in math and science at the grade school level, partnerships with local community colleges and universities, and, on the national level, recruiting efforts and university relationships. “We are continuously looking for new solutions to this issue,” he says, citing as examples an apprenticeship Boeing is creating to help close the gap in the skilled-crafts job family and efforts to increase Boeing’s partnerships with local entities to include nonprofits and state entities that can direct new talent to the organization. “Additionally, we are encouraging our employees to utilize their networks to assist in the process of finding the talent that we need for the present and the future.”

Call to Action

On a national level, several states have already taken progressive steps to address their skills gap issue. Colorado, Minnesota, Michigan, Connecticut, Pennsylvania, Washington, Mississippi and Massachusetts forged initiatives and are working closely with employers, educators and the work force to overcome their challenges.

“Arizona needs a sector strategy,” Burkhart says. “As Peter Drucker said, ‘The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.’ We can’t continue to operate like we did in the past. It is no longer a buyer’s market for talent, and we need an initiative quickly.”

Burkhart is working to create a regional workforce summit comprised of economic and workforce development leaders; major trade associations; chambers of commerce; leading employers; and human resource, education and political leaders. Summit participants will devise a regional two-part plan addressing a fast-track tactical skills shortage solution and a strategic pipeline solution for the mid-decade retirement bubble. While the summit is still in its initial planning stages, Burkhart encourages those concerned about Arizona’s skills gap to engage with local workforce and economic development groups now so their concerns will be addressed.

Bridging the skills gap is not going to be easy. Nor will it happen overnight. But it will take a team effort and a “can-do” attitude. “There’s nothing like a challenge to get up in the morning,” Burkhart says.