Bridging the Gap: Addressing the Impact of Education and Skill Mismatches on the US Labor Market

INTRODUCTION

The US has long been known as a place where education is highly valued and where hard work pays off, leading to the road to success. However, in the present day and age, education and skills mismatch has become a major roadblock for many. As the economy evolved, it led to a greater demand for skilled labor. With rapid improvements in automation and technology, an increase in demand for qualified professionals has been observed, leaving many individuals behind. As per research by the International Labor Organization (ILO), a recognized body of the UN, over 935 million workers worldwide have jobs that don’t match their educational records. (Gammarano 2020) Moreover, skills mismatches harm up to 45% of workers in the United States.

CAUSE AND EFFECT

One of the types of skill mismatches is overeducation, which occurs when a worker’s level of education exceeds the needs of their employment. A published paper in The National Bureau of Economic Research suggests that about one-third of the workers are overeducated for their jobs, earning significantly less than those working at jobs that match their skill level. (Clark et al., 2017) Furthermore, underemployment, which occurs when workers are unable to utilize their skills fully, has been found to lead to a lack of motivation in the workplace, thereby adversely affecting their productivity.

Research by the Organization for Economic Co-operation and Development (2018) makes it clear that such skill gaps can have far-reaching effects on the global economy. As the workers engage in activities not suited to their potential, education and skills, both job and life satisfaction take a hit. The emergent consequences are decreased productivity, lower salaries, and higher unemployment rates. The companies, too, suffer with respect to their competitiveness in the market. Thus, a mismatch in skills can have a detrimental effect on economic growth.

A lack of digital skills can also have a huge economic impact. According to a study by the National Skills Coalition, nearly one-third of the labor force in the United States lacks rudimentary digital skills. (Bergson-Shilcock, 2020) The research shows that individuals who lack digital skills are more likely to be unemployed or stuck in low-wage earning jobs with few growth prospects. The data of the jobs analyzed revealed the necessity of digital skills in 92 per cent of professions. (National Skills Coalition, 2023). Additionally, a lack of digital skills can lead to lower productivity and creativity in firms, affecting their positions in the red ocean, i.e. extremely competitive market space. As the global economy becomes more and more reliant on technology with the integration of tech in a surplus number of industries, the demand for digital skills is only projected to go higher.

The World Economic Forum’s 2018 report, “The Future of Jobs Report”, identifies some of the skills which will be prerequisites when applying for most jobs. (Leopold et al., 2018) Roles which will be higher in demand include those primarily based on the use of technology, such as Data Analyst, Software and Application Developer, and E-commerce and Social Media Specialist, among others.

Technological breakthroughs and automation are redefining the skills required in many industries, resulting in a growing skills gap. The report predicted that by 2022, more than half of all employees would need significant reskilling and upskilling to stay up with the evolving labor market.

POTENTIAL SOLUTIONS

In such a VUCA world setting surrounded by volatility, unpredictability, complexity, and ambiguity, it is critical that those entering the job market develop strategies and upskill themselves to meet labor market demands. One plausible option is to provide training programs that offer skill-specific education that is aligned with labor market demands. Such a provision would not only help people enhance their skills and be the right fit for the job, but it would also assist companies in finding the right talent to fill job openings.

Another alternative is to promote lifelong learning and skill development. As technology advances, it is critical for workers to stay up to date on the latest skills and innovations. Giving employees access to training and development programs will surely help them learn new skills and remain competitive in the employment market.

Government initiatives also play an important role in addressing the problem of skills mismatch. One such initiative can be of tax breaks. For example, giving tax concessions to businesses that spend on employee training and development will incentivize enterprises to upskill their employees. Such an action would have twofold benefits: greater productivity and emergent profitability. Furthermore, the government can also increase the funding for vocational and technical education programs to align the education of the workforce with the time-to-time needs of the labor market.

Solving the skills mismatch issue is surely a difficult challenge, one that necessitates a coordinated effort from all the involved stakeholders, such as the government, educational institutions, employers, and employees. The issue also requires a long-term commitment to investing in industry-aligned education and developing training programs that match the labor market’s needs and expectations.

CONCLUDING NOTE

The impact of education and skill mismatches on the US labor market cannot be ignored. Similar challenges exist in India’s labor market as well. India is a young country with over 900 million individuals in the working age group. (Bhargava 2022) As India undergoes rapid economic growth and technological advancements, the need for an adequately skilled workforce will rise. Timely addressing education and skill mismatches in India will ensure adequate employability and productivity of the country’s vast labor force. By adopting similar strategies of skill-specific education, promoting lifelong learning, and government initiatives to align education with industry demands, India can also strive towards bridging the gap and creating a labor market that meets the evolving needs of its rising economy.

Author: Ashray Gupta

About the Author: Student of IPM-01

REFERENCES AND RELEVANT LINKS

Gammarano, S. (2020, February 26). 258 million workers in the world are over-educated for their jobs. International Labour Organiation Department of Statistics. https://ilostat.ilo.org/258-million-workers-in-the-world-are-over-educated-for-their-jobs/
Clark, B., Joubert, C., & Maurel A. (2017). The career prospects of overeducated Americans. IZA Journal of Labor Economics, vol 6(1). http://doi.org/10.1186/s40172-017-0053-4
Organization for Economic Co-operation and Development. (2018). Education 2030: The Future of Education and Skills. Organization for Economic Co-operation and Development.
Bergson-Shilcock, A. (2020, May 20). Nearly 1 in 3 workers lack foundational digital skills, new report finds. National Skills Coalition. https://nationalskillscoalition.org/blog/future-of-work/nearly-1-in-3-workers-lack-foundational-digital-skills-new-report-finds/
National Skills Coalition. (2023, February 6). New Report: 92% of Jobs Require Digital Skills, One-Third of Workers Have Low or No Digital Skills Due to Historic Underinvestment, Structural Inequities. National Skills Coalition. https://nationalskillscoalition.org/news/press-releases/new-report-92-of-jobs-require-digital-skills-one-third-of-workers-have-low-or-no-digital-skills-due-to-historic-underinvestment-structural-inequities/
Leopold, T.A., Ratcheva, V., & Zahidi, S. (2018). The Future of Jobs Report, 2018. World Economic Forum.
Bhargava, S. (2022, April 3). India’s GDP can grow to $40 trillion if working-age population gets employment: CII report. The Hindu. https://www.thehindu.com/business/Economy/indias-gdp-can-grow-to-40-trillion-if-working-age-population-gets-employment-cii-report/article65286806.ece

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