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Here's What's Really Holding Back the US Jobs Market

Wednesday, 10 Oct 2012 | 11:55 AM ET

Jim Murphy is like a lot of business executives these days—looking to hire but having a hard time finding the right people for the jobs he needs to fill.

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In fact, the CEO at Almac Clinical Technologies in Souderton, Pa., has faced this unlikely problem for the past several years, a time during which his life-sciences business has expanded but the pool of workers fitting his needs has not.

"We've steadily been hiring for the last couple of years, but it's always a lot of work," Murphy said in a recent interview. "You end up having to develop ways to try and and find these folks, whether it's using recruiters, strengthening your own recruiting focus internally, even just old-school things, like bigger internal employee referral bonuses."

At a time when policy-makers are groping for ways to reduce the nation's persistently high unemployment rate, companies with specialized needs are struggling just as much to find the right employees for a challenging new wave of job needs.

What economists call the "skills gap" is one of the leading causes of unemployment today.

Quite simply, the demand for high-levels skills is outpacing the amount of people who have those skills, contributing mightily to structural unemployment, a term that refers to those out of work for reasons that exceed simple economic gyrations.

"Today, there is a significant and growing mismatch between the country’s demand for talent and its current supply," research firm Deloitte said in a study released last week examining the skills gap issue. "The type of talent demanded today — and needed tomorrow — is increasingly either outdated or out of stock."

Matching workers with specialized qualifications has turned into a lucrative business for Jason Hersh.

Indeed, Murphy's dilemma has been Hersh's gain.

Hersh is managing partner and vice president of sales for Klein Hersh International, an affiliate of international recruiting firm MRINetwork, and works with Almac to attract qualified workers.

"There's increasingly becoming a misalignment between supply and demand for talent," Hersh said. "Demand is high and supply is becoming increasingly difficult to find."

That may seem an unusual development in a country where the unemployment rate is 7.8 percent and 12.1 million people are out of jobs and looking for work, a tally that doubles when counting those working part-time for economic reasons or who have given up looking altogether.

But it's the new reality for the American jobs market.

Among Deloitte's findings:

  • Skills college students attain are out of date by five years after graduation.
  • About two-thirds of manufacturers say there is a shortage of available and qualified workers; 56 percent say the shortage is going to get worse in the next three to five years, and about 600,000, or 5 percent, of jobs remain unfilled "due to a lack of qualified candidates."
  • The problem is exacerbated by an aging workforce, with about 40 million workers 55 and older to be in the employment pool by 2013.

Deloitte researchers William D. Eggers and John Hagel concluded that the U.S. is badly lagging behind other leading industrialized nations in developing workers with the skills necessary to fit the changing workplace.

"Traditional mainstay industries are contracting, while our competitive advantage erodes under pressures from new global markets," Eggers and Hagel wrote. "Despite all of these warning signs, our country lacks the cross-cutting policies needed to develop the most valued American commodity of all: good jobs."

Adapt, or 'You Risk Becoming Irrelevant'

In the overall labor market, there are about 3.6 million job openings, a number that has remain essentially unchanged over the past several months, according to Labor Department data released Wednesday.

The greatest amount of vacancies, at 708,000, are in the professional and business services sector. Construction and manufacturing had the fewest openings in August, probably attributable to seasonal changes in those fields.

Since the labor market trough in mid-2009, most of the positions that have been filled are in the lower-income categories, with about 60 percent of the 4.5 million new jobs coming in positions that pay less than $13.83 an hour, according to the National Employment Law Project. (Read More: Welch: Jobs Numbers Assume 5% Growth Rate—‘Impossible!’)

"That reflects an imbalance between what skills employers are willing to pay for and the level of skills and education that workers are bringing to the market," said Harry Holzer, a contributor to the Russell Sage Foundation's Future of Work program, which has been tracking employment trends during the downturn.

"It seems like employer demand for skills has increased faster than workers that have those skills and education," Holzer said.

Holzer added that the level of job vacancies is higher than what it normally would be in a bad jobs market, reflecting the difficulty in matching workers with open slots.

Time and again in conversations with business executives the talk turns to education and the inability of the system to turn out prospective workers with the right technological know-how to adapt to new demands.

Santelli on JOLTS Survey
CNBC's Rick Santelli breaks down the data on job openings.

But blame also rests on workers who are not doing enough to keep themselves properly trained to face new challenges.

"Employees have to adapt," said Geoff Hoffman, chief operating officer at Chicago-based DHR International, a firm that helps companies find executive-level talent. "The newspapers are going away, the video store went away. Individual businesses always have to make sure you're in the best position to adapt and change. Otherwise, you risk becoming irrelevant."

In its breakdown of the skills-gap quandary, Deloitte recommended a number of steps policy makers need to take if the chasm is to be filled.

They focus on improving education, making regulations more employment-friendly for companies, and streamlining immigration policy so that foreigners trained and educated in the U.S. have the ability and incentive to stay here.

Also, the firm endorses encouraging foreign investment in the U.S. by dropping overly restrictive barriers; reforming unemployment insurance to remove disincentives to work; and both protecting intellectual property innovation while simultaneously promoting the flow of ideas through the corporate world.

"We have truly reached an inflection point," the Deloitte study said. "Individuals, firms and nations can no longer remain complacent about the talent required to succeed; they must constantly strive to refresh their workforce.

"Public policy cannot solve these issues alone. It can, however, have a huge impact in creating a better environment for talent to thrive in this country, and for America to attract the most talented people in the world to its shores."

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