Can US Employers Close the Skills Gap With Higher Wages Alone? Probably Not.

Can US Employers Close the Skills Gap With Higher Wages Alone? Probably Not.

In a recent column at BloombergView, Michael Strain, an economist at the American Enterprise Institute, asserted that US businesses, particularly manufacturers, protest too much about the skills gap. Their inability to source skilled employees could be solved, he argued, if they were simply willing to pay higher wages for the talent they need:

Wage growth is picking up, but it is lower than what many economists expect in light of overall economic conditions, and it is not soaring for specific industries.

Simply put, if businesses can’t find workers — or can’t find workers with the right skills — they should raise their wage offers. Basic supply-and-demand logic suggests that doing so will broaden the pool of workers interested in the job, and will make the job more desirable to applicants. In addition, raising wage offerings would likely draw in some of the millions of Americans who report they want a job but are out of the labor force. So unless wage growth picks up, the warnings about labor shortages will fall flat.

Strain is not the first economist to argue that the skills gap is a simple supply-and-demand problem that could be solved by raising the price of labor, or that the problem is on the demand side (not enough attractive jobs) as well as the supply side (not enough skilled workers). Stagnant wage growth may be a factor in US employers’ labor market woes, but in focusing exclusively on wages rather than training and hiring barriers, Strain’s claim oversimplifies the challenge employers are facing. Years of research consistently tell us that while competitive compensation is a large component of what attracts candidates to jobs, there’s no simple formula by which you can convince any given candidate to take a job simply by offering a high enough salary.

It’s easy to point to “basic supply-and-demand logic” to criticize manufacturing companies when you don’t actually understand their experiences in local labor markets, but who says manufacturers aren’t trying to raise wages already anyway? A 2015 study by the Manufacturing Institute and Deloitte showed that 80 percent of manufacturing companies were already willing to pay more than market rates to reduce the skills gap—especially for more skilled labor, such as machinists, craft workers, and industrial engineers. Yet according to our own research at CEB, now Gartner, only 23 percent of heads of HR in the manufacturing industry believe they can close critical skills gaps over the next 12 months.

Read more

Mars Talks Up Culture to Sweeten Employer Brand

Mars Talks Up Culture to Sweeten Employer Brand

Although the candy company Mars owns some of the world’s most famous brands (who hasn’t heard of M&Ms?), its employer brand is much less well known, Quartz’s Oliver Staley observes. Staley takes a close look at the company’s ongoing efforts to become more attractive to talent as it plans to expand its workforce by 70,000 employees over the next decade. Like other big players in the confectionery industry, Mars has historically been very serious about guarding its trade secrets, but its notoriously secretive culture had the downside effect of limiting the number of people outside the organization who knew what it was like to work there.

The company now faces the challenge of attracting talent from a generation of young people who grew up enjoying Mars products, but may never have thought of it as a place to pursue a career:

To get its message out, Mars is doubling the staff dedicated to luring college students, deploying social media, and honing its sales pitch to woo potential candidates. That often means showering them with M&Ms, and handing out gift boxes stuffed with candy bars and snacks. In making its pitch to MBAs and recent college graduates, Mars also stresses the variety of opportunities it can offer new hires because of its many business lines, and recruiters talk a lot about the company’s corporate culture, which historically combines egalitarianism with eccentricity—sometimes with surprisingly forward-thinking results.

That culture has in some ways been ahead of its time—Staley notes that Mars was ahead of most American corporations in adopting ideas like open offices, flat management, and bonuses based on company performance. The company scores high on lists of great places to work and people who work there tend to stick around. Indeed, that’s one possible reason behind the company’s current recruiting challenge:

Read more