For decades, America’s unmatched economic achievements have depended primarily on U.S. creativity, innovativeness and entrepreneurialism. With 231,588 American utility patent applications filed just in 2008, representing 51 percent of world patents filed that year, these vital characteristics appear to be alive and well.

This, no doubt, will result in fantastic new technologically-advanced products and services, giving U.S. companies a continued competitive advantage. Plus, as American firms shed non-core functions and focus increasingly on sophisticated core competencies, they will require higher-level skills from employees. But will America’s workforce be able to supply the necessary skill sets?

Workforce Skills Have Stagnated

The United States led the world in expanding access to high school, and then in post World War II, access to college. By 1966, approximately half of the workforce aged 25 and older had completed high school and about 10 percent had completed college. By 2006, more than 90 percent of adults in the labor force had a high school education and more than 20 percent held at least a bachelor’s degree. However, most of the progress occurred in the 1970’s and early 1980s, Federal Reserve Chairman Ben Bernanke said.

“America rose to economic prominence on the shoulders of the most highly skilled workforce in the world,” stated Jacob Kirkegaard, Research Fellow at the Peterson Institute for International Economics, a Washington, D.C. think tank, and author of The Accelerating Decline in America’s High Skilled Workforce. “However, during the last 30 years, skill levels in the U.S. workforce have stagnated.” Kirkegaard predicts that America could face “broad and substantial skill shortages” in this decade. Plus, he confirms what many employers already know: new workforce entrants do not possess higher skills than retiring baby boomers.

In addition, “growth in the labor force is projected to slow significantly for two reasons: the babyboom generation is aging and retiring, and the labor force participation rates of women have peaked,” the U.S. Bureau of Labor Statistics reports. Evidence of both a lack of skills and a slower labor growth rate have shown up in surveys for some time.

As early as 2004, Deloitte Research noted an acute shortage of talent. In 2005, the National Association of Manufacturers said 81 percent of surveyed recipients faced a moderate or severe shortage of qualified workers. In 2007, a survey by Manpower Inc. said 41 percent of U.S. companies had difficulty filling positions.

The Skills Deficit Will Re-emerge

Throughout the recent recession, companies have reduced their staffs at unprecedented rates. In turn, skills issues have become less pronounced. However, as sustainable growth resumes in 2010 and the focus of companies shifts from survival mode to one designed to achieve greater marketshare and boost global competitiveness, the unemployment rate—which reached 10.2 percent last October and fell to 10 percent in November—will recede. In turn, the demand not only for more employees, but for more employees with sophisticated skill sets will rise. However, the ability to find more talented workers will be difficult. In turn, businesses may suffer.

For example, according to a recent report published by McKinsey Global Institute, “a purchasing manager in a U.S. manufacturing multinational might be tasked with buying the best value inputs from anywhere in the world to supply factories in Asia. To do that job well, she would need advanced skills in a host of information technologies, the ability to coordinate the activities of colleagues and business partners in a global network, and very likely formal education in foreign languages—a scarce skill set, but one in increasing demand from employers.” If these skill sets are in short supply in the United States, foreign competitors may obtain the upper hand.

Foreign Governments Understand the Importance of Education

The “U.S. labor market policy coming out of the recession would do well to focus on redeveloping America’s human capital, not only for students in schools and colleges but across the current workforce,” the McKinsey study says. This is very important since skills impact the future economic success of companies and their nations, and of course, job applicants. But as a whole, the skills outlook is poor.

The McKinsey study continues: “Too few have the skills for attractive jobs and, as a consequence, too many workers are employed in industries and occupations where demand has been falling, incomes have stood still, or both.” This is a serious problem since “Two-thirds of the fastest-growing job categories in the U.S. require some form of post-secondary education,” a 2009 Goldman Sachs report says.

More foreign governments understand the importance of education and are dedicating greater resources to it. As a result, Kirkegaard confirms that the number of high-skilled workers in other countries is rising faster than in the United States. And as our global competitors graduate greater numbers of highly motivated workers, new challenges will emerge posing various threats to American business and innovation for decades to come.

More Corporate Training and Better Retention Policies Are Required

Like product cycles, skills cycles have accelerated. For example, “A skill cycle that once ran for three years now lasts just nine months,” says Manpower Inc., a leader in the employment services industry. Plus, as the level of global competitiveness increases, employers will need to invest more in training programs, continually refresh and upgrade employee skills, and work with local universities and community colleges to ensure courses are offered that satisfy market demands.

Noted above, finding skilled employees in 2010 and beyond will be difficult. Consequently, it will be even more important to retain the valued ones you already have. According to Dr. Jim Kestenbaum, a corporate psychologist and founder of The Solutions Group, even in bad times, good companies invest in their employees and productivity boosting technologies. This sends a very powerful message to employees and other stakeholders, he says. In addition, Kestenbaum suggests the following:

• Tough economic times are hard on everybody. People don’t want to be taken care of—they want to be treated as adults.
• Sensitive issues are more manageable for employees when they have the information to understand what’s going on, and the opportunity to be proactive.
• Treat people as your partners in the business.
• As you involve and support employees, they’ll do the same for you.

Education Is Key to Many Things

“Education is important because it is directly linked to productivity, which in turn, is the critical determinant of the overall standard of living,” Bernanke noted. Importantly, he continued, the world economy is benefiting from the expansion of trade and our ability to reap the benefits of globalization will depend on the flexibility of our labor force.

About The Author John Manzella [Full Bio]

John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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