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Skills Gap Remains A Concern Among Private Companies As Employment Outlook Creeps Up

08/13/2014

Forbes. August 11, 2014.

Employers are definitely looking to hire over the next year or two, according to the quarterly Business Trendsetter Barometer survey from PwC on hiring outlook and strategy among private US-based companies. But their hiring will be restrained in two ways: they foresee a low head count increase of just 1.8% for the next year, and they have very specific skill sets in mind. Furthermore, many employers are seeking mergers and acquiring smaller businesses to gain access to time-tested employees, rather than putting money into hiring or training new ones.

The study found that close to a third of private companies identified a skills gap GPS -0.78%, or a lack of qualified workers, as a barrier to growth. That’s a number significantly lower than the national conversation around the perceived skills gap might lead you to expect, though Ken Esch, a partner in PwC’s Private Company Services practice, says that that’s historically higher than it’s been in years. It has been at least five years since employers reported a skills gap to be that big of an impediment to hiring, Esch estimates.

While an anticipated 1.8% head count increase is still positive, as recently as last year, head count increase was at 3.6%. Esch believes that the lingering effect of the recession is an important factor behind the drop in head count increase. “Many places had reduced to the bare minimum,” Esch says of the recession aftermath. “What we saw last year was a replenishment of [the jobs of] retired employees.” That said, head count increase this far out from a recession could be expected to be higher. In the past, even a 3.6% head count increase during a recovery period was seen as a slow comeback.

To that end, Esch credits the same force that lies behind the skills gap: technological change. Many companies no longer require as many employees in manufacturing, for instance, as they once did. The companies surveyed by PwC were basically split between providing services and goods, but Esch thinks that both have seen their workforces affected by technology that either cut back on the number of employees they needed or rendered employees who have been out of the game due to recession-related layoffs so technologically out of touch as to be obsolete. That is to say, the companies that still need people can’t find potential employees trained for the work needed, and the cost of training them is often deemed prohibitive – hence the skills gap.

Some companies are investing in talent attraction and retention, though. Esch cites wellness and flexibility benefits that attempt to compensate for a lack of raises. In fact, according to Esch, 20% of survey respondents reported feeling pressure to raise salaries – up from 13% last quarter, the highest since the recession began. He’s also seen data from companies that are designing employee training programs so that they can hire people who need additional skills. However, many companies reported that filling positions by merging with another company and keeping only the strongest employees from both places was seen as an attractive option, rather than investing in unemployed potential talent. Some 54% of companies engaging in mergers, joint ventures, and strategic alliances cited access to skilled employees as a motivation.

The silver lining here seems to be that while individual companies aren’t forecasting high head count increases or immediate interest in job training programs, hiring does remain a priority for 56% of the private companies surveyed. 84% intend to prioritize “workforce investment,” which spans anything from training programs to talent retention benefits, over the next two years. So we may begin to see the development of more and better worker training over the next couple of years, after all, as long as the hopefully continues to improve.