Yesterday’s jobs report is more than a report card on the economy. It is a telling reminder of a big problem: the growing gap between the demand for workers and the supply of people looking for work. Consider that 8.5 million people are seeking work while 5 million U.S. jobs go unfilled, according to the latest U.S. Labor Department figures.
Behind this paradox is what economists call an “information void.” While we say we live in an “information age,” companies and job seekers might as well be operating blindfolded. Employers are in the dark about which candidates have the requisite skills, while job seekers are at a loss to know which jobs best fit their skills.
For any marketplace to be efficient, information is critical. Sadly, the employment ecosystem is one of the least effective at filtering information. In fact, the much-maligned used-car market puts it to shame. Let’s say you want to buy a 2008 red Ford Explorer. While you have at your fingertips statistical averages on price, performance, and reliability of Explorers with different mileages, that is typically not enough. You can get a specific car’s condition and performance checked by a licensed mechanic. Alternatively, you can have the security of buying a certified preowned car, its reliability assured via a warranty.
Yet that same assurance is missing in the employment ecosystem. Just like every 2008 red Explorer doesn’t perform the same, every business graduate from the State University of New York doesn’t have the same skills and qualifications.
Today, no objective way exists to evaluate the job-related credentials of, for example, SUNY business grads.
Instead, a hiring manager has to rely on a candidate’s profile on a professional network, a job portal, or a résumé. How does the manager determine which candidates have the necessary skills? Work experience doesn’t necessarily mean the candidate has the required capabilities. In addition, a major shift in jobs in the U.S. postrecession has neutered the transferability of skills. For instance, jobs in manufacturing and construction have decreased, while those in health care have increased. A person with manufacturing or construction experience may be perfectly capable of doing a health care job. However, no mechanism exists to determine that.
Entry-level workers present even more of a challenge since they have little or no work experience. Companies typically use the reputation of a college or GPA as a proxy for skills. Yet neither predicts job performance. Laszlo Block, SVP, People Operations at Google, famously said that Google’s analysis showed that GPA did not predict job performance.
Then there are the candidates who aren’t from elite colleges and lack impressive academic credentials. These individuals are typically locked out of the job market. Yet my company’s Aspiring Minds National Employability Report found that 50% of candidates with the skills to do a job–what we call employable candidates–don’t come from highly regarded colleges.
Massive Open Online Courses (MOOCS) have added another aberration to the employment market. Thousands of job seekers who have completed MOOCS and acquired new skills are likely invisible to employers.
All these factors make hiring tough, costly, and time-consuming for employers. On the flip side, job seekers operate in a vacuum. Having a college degree doesn’t necessarily mean they have the needed skills to perform a job competently. In fact, a job seeker has no clue if he is qualified unless that person has experience or has been tested on the job’s skills. Nor does a college degree tell someone where he lacks skills or how to improve to get a desired job. A certified preowned car is more tested than a college graduate.
What is the solution?
Here are three ways to fix the problem:
1. We need a “lemon check” for job seekers. In this case, the check would help job seekers determine their job readiness and highlight job-specific gaps, while it would help employers find employable talent with ease and avoid getting stuck with a bad hire.
A standardized, objective evaluation that measures both general skills like analytical reasoning and functional skills like those in health care, accounting, or technology would provide a way for candidates to gain useful credentials, and give employers an objective way of evaluating candidates’ skills.
2. Colleges need to do more. College career offices need to support student employability and provide objective evaluation and guidance to students on their employability skills at an early stage. That way, students can take the necessary courses to improve their skills.
3. Make candidate selection more merit-driven. Employers, along with recruiters, need to make candidate selection more merit-driven and inclusive by debunking inaccurate and biased signals, such as GPA and school ranking, and the enablers, such as job boards and professional networks, by providing both employers and job seekers more competency-based information to enable better hires.
What is critical in solving the jobs-employment paradox is more-transparent and better information. This will mean that all students–not just those from the Ivy League or the tech titans–will have a fair shot at getting the right jobs. Meanwhile, employers won’t be facing a rising tide of jobs that can’t be filled because of a lack of known talent.