Workforce Innovations

Feature

The Talent Gap
Preparing for the Coming Workforce Shortage

One common complaint from business leaders today is the lack of talented, experienced staff to handle the ever-increasing complexity of work. This lack of qualified personnel is only expected to worsen over the coming decades as the gap between available, skilled workers and unfilled positions expands due to the mass retirement of the Baby Boom generation and the limitations of the current and coming generations to fill the gaps in number and knowledge.

In the recent past, many companies—particularly those within the high-tech industries prevalent in Silicon Valley—have looked outside of the United States for workers with the necessary knowledge and experience to meet their staffing needs. However, due to the decreased number of H-1B visas granted (65,000 annually, down from 195,000 as recently as 2003) and the stringent, post-9/11 immigration rules, the push to attract workers from abroad to fill local positions is no longer as viable a solution. Instead, companies must focus their attention locally and plan proactively to overcome the impending gap.

The gray ceiling

One of the primary reasons for the approaching talent gap is the anticipated exodus of working Baby Boomers from the labor force. Within Santa Clara County alone, the share of the workforce reaching retirement age (55–65) will increase from 16% currently to 20% in 2015 and peak at nearly one quarter of all working-age individuals in 2026. This amounts to a 61% increase in individuals eligible for retirement as compared to an overall increase in the working-age population of only 12% during the same time frame. In terms of raw numbers, this projects a potential loss of as many as 120,000 people from the local workforce with a corresponding gain of only 20,000 workers. Many of those entering the workforce will have limited experience and only a fraction will have the necessary training to fill the more technical positions that drive the Silicon Valley economy, further emphasizing the dramatic loss of the experienced Boomers.

This demographic shift is further exacerbated by the realities of the workforce. An article in USA Today (7/9/06) reported that many Americans are forced to retire years before they are ready to, primarily due to illness or unemployment, both of which are more challenging to overcome with age. The consulting firm of McKinsey & Company reportedly found that while nearly half of Baby Boomers expect to work past 65, 40 percent of current retirees were forced to retire earlier than they had planned. The average age when current retirees left the workforce, according to the McKinsey survey, was 59. The federal government reports a similar trend. According to the U.S. Bureau of Labor Statistics, only 60% of 60-year-olds and 32% of 65-year-olds were employed as of 2005.

However, an article in Fortune (8/15/06) noted that many of those older workers who are able to remain in the workforce choose to work past retirement age to the frustration of their younger colleagues. This dynamic tends to lead to a drain of younger talent, who get frustrated with the lack of mobility within a company or an industry and leave for better opportunities.

There are companies, though, that have found ways to retain older workers while keeping the younger workers engaged and mobile. Some companies, for example, have developed mentorship opportunities so that information and knowledge can be shared between the older and younger workers, resulting in greater opportunity for continuity of knowledge and leadership. Companies are also transitioning away from the practice of “siloing” younger staff. Rather than keeping less-experienced staff in a single, stagnant position, younger workers are instead dispersed throughout the company to develop greater breadth and depth of experience. Companies are also retooling their work policies to provide more flexible scheduling and bonuses to retain older workers.

Is the next generation prepared?

Regardless of the realities of an aging Boomer generation, a second, more troubling situation exists that will have an even greater impact on all levels of the workforce: the struggling public school system and the inadequate level of education that many of the younger generation will possess as they enter the workforce.

In his February 2006 State of Education address, California’s Superintendent of Public Instruction Jack O’Connell noted the increased demand for higher standards in order for California’s companies to compete in an increased global marketplace. O’Connell stated, “That doesn’t mean all students will go to college, but it does mean we need to invest in our career technical education programs as well as our college preparatory programs to make sure both truly prepare students for the workforce they will face.”

The challenges, however, are how best to prepare students for careers in fields that may not currently exist, and how to streamline the educational system to be more flexible and adaptive to meet ever-shifting workforce demands. San Bernardino County’s Alliance for Education has an innovative approach to the problem. In this partnership, members from local business team up with government, education, the community, and faith-based organizations to collectively combat the “achievement gap.” By collaborating with business, schools better understand what future workers will need to succeed both locally and globally.

Tomorrow’s workforce challenges may seem too far removed from the day-to-day efforts of keeping a company or an economy running, but the reality is that the changes are coming and the better prepared we are today, the greater the likelihood that our companies and our communities can work together to ensure that the gap remains manageable.