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There is a Relationship Between the Skills Gap and the Gig Economy

September 1, 2017

When I was in graduate school in the 1970s there was an emerging trend whereby corporations were abandoning their lifetime commitment to employees and abandoning the notion of retaining horizontal functions in favor of “right-sizing”, “out-sourcing”. This change was occurring at the same time as writers like Daniel Bell and Alvin Toffler wrote about the transition from an industrial society to a post-industrial society where workers would be expected to “change their profession and their workplace often” because “professions quickly become outdated”. As a result, workers in the post-industrial society would expect to have many careers in a lifetime and people would be expected to look more and more for temporary jobs.

This notion was appealing to many in my generation who saw our parents as slaves to a hierarchical corporate world where they were expected to go where “headquarters” sent them and perform whatever tasks the “higher-ups” wanted them to do. We saw the opportunity to change jobs as we pleased as an advantage. We would be more independent than our parent’s generation, freed from the corporate bondage, and no longer “cogs in the machine”.

The emerging post-industrial economy also worked for corporations who strived to reduce their overhead. Instead of being burdened with operational and legacy costs associated with divisions like HR, payroll, and training that had nothing to do with their primary mission of manufacturing, corporations outsourced those functions to contractors who could perform those tasks more cheaply and effectively by using technology. These nascent businesses initially offered their employees relatively higher wages but fewer benefits and no pensions. But as computer technology made the tasks easier it became possible for these contractors to employ fewer and fewer skilled laborers which, in turn, reduced their costs and increased their profits.

One area that many major corporations abandoned altogether was training. Instead of having high salaried corporate staff training employees, major businesses hired ad hoc consultants for those services. The consultants didn’t require benefits or pensions and could be replaced if the skills they taught were no longer needed.

in a recent article in the MIT Technology Review. Andrew Weaver suggest that this lack of corporate training may be the real cause of the so-called “skills gap” that has been blamed on public schools and colleges. Mr. Weaver asserts that despite the conventional wisdom that there is a gap between the needs of employers and the workforce, there is no data to support that conclusion. Instead, the problem is the lack of training provided by employers themselves:

The manufacturing survey data indicate that only half of U.S. plants provide formal training to their production workers. By contrast, in the 1990s—the last period for which nationally representative survey data on training are available—70 to 80 percent did so. Meanwhile, only 52 percent of IT help desks have relationships with institutions from which they hire workers or receive training services. For clinical labs, the absence of a local training institution is a significant predictor of hiring difficulties.

Instead of fretting about a skills gap, we should be focused on the real challenge of knitting together the supply and demand sides of the labor market. Thinking about the real financial and institutional mechanisms necessary to make, say, apprenticeships work is far more productive than perennially sounding alarms about under-skilled workers.

Businesses of all sorts, from retail to construction to manufacturing, have talked about the need for apprenticeships for decades. But instituting a program of apprenticeships requires that the businesses underwrite training programs, that they cultivate skills in their employees, that is… that they have a commitment to improving the well-being of their employees.

The so-called “gig economy” does provide independence for employees, employees who are perpetual “free agents” as opposed to employees who are committed to an employer. This new economy feeds into a reluctance on the part of employers to invest in training and that, in turn, leads to a perpetual mismatch between the skills employers need and the skills “free agents” possess… and in this day and age the employees, not the employers, are expected to figure out the skills they need and pay to gain those skills over and over again.

Mr. Weaver concludes his article with this:

The danger is not that we will run out of tasks humans can usefully perform or that required skill levels will be catastrophically high; it’s that misguided anxiety about skill gaps will lead us to ignore the need to improve coordination between workers and employers. It’s this bad coordination—not low-quality workers—that presents the real challenge.

I would not want to see a return to the paternalistic and hierarchical corporations that prevailed in the 1950s and 1960s, but it might be worth considering some way for governments to provide life-long learning opportunities for employees as well as life-long health benefits and assured pensions. Unless that kind of shift in thinking occurs, the so-called “skills gap” will persist because no one in the free agent nation can afford to pay the costs associated with re-education over and over again.

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