October 27, 2013

Charles Lawton: Management experiencing ‘skills gap’ of its own

It’s a part of the problem that hasn’t been given sufficient attention.

The buzz surrounding the issue of “skills gaps” in our labor force brings to mind the probably apocryphal but strikingly insightful quotation attributed to Milton Friedman. Escorted to a widely showcased hydroelectric construction site in India, the Nobel laureate economist asked why there weren’t more bulldozers among the thousands of workers scurrying around with shovels. “Oh,” replied his beaming host, “that’s because we’re trying to create more jobs.” “Then why,” replied Friedman, “don’t you take away their shovels and give them spoons.”

This story is usually cited as an example of the importance for development of investing in modern capital equipment. But it is equally applicable as an illustration of the importance of creative human resource management and investment in human capital. What skills workers do or don’t have is important only in the context of what they are and are not asked to do. This is a central, but largely ignored, point of a report recently released by the Organization for Economic Cooperation and Development titled “Skills Outlook, 2013.”

The report is based on a survey of education attainment and the possession and use of skills in adult workers in 24 countries. As might be expected, news coverage has focused on rankings and how poorly the U.S. fared. “Oh my,” we say, “just the latest in the litany of reports showing how terrible we are for not preparing our children to compete in the global economy of the 21st century,” and turn the page.

But not so fast. The most interesting part of this one is not the rankings or even who does and does and does not have skills. It is, rather, the findings about how skills are, or, more importantly, are not, put to use across all 24 countries. “Proficiency in literacy,” the report says, “explains only about 6 percent of the ... variation in the use of reading skills at work across all participating countries.” And a similar pattern exists for proficiency in numerical skills. In simple terms, people who could use shovels are asked only to use spoons and people who could use bulldozers are asked only to use shovels.

The so-called “skills gap” problem is not simply a question of “dumb, ill-prepared” workers. That might be part of the problem, but it’s not the entire problem. Another part – one that hasn’t garnered sufficient attention, probably because it doesn’t lend itself to easy rankings – is “dumb, ill-prepared” managers. The OECD report concludes that “improving the efficiency with which workers are allocated to jobs can improve the extent of skills use at work, and thus improve overall productivity and boost economic growth.”

What the report doesn’t say but might easily be added is that “improving the efficiency with which workers are allocated to jobs” will also free up places for less proficient workers, thus accelerating both employment growth and the opportunities for on-the-job-skills growth. Moving “mute inglorious” spoon wielders to positions that require shovels will boost overall productivity and simultaneously allow more unemployed workers willing to give it a go with a spoon the opportunity to join the work force.

The policy response to all this, then, is first, to cease wringing our hands about “skills gaps” between the ears and hands of existing and potential workers, second, to cease putting all our attention and money into new educational programs devoted to methods for using shovels and bulldozers and third, to expand the range, variety and frequency of in-house management training. The greatest gains will come from identifying workers whose full skill set is currently being ignored or underutilized and finding ways to bring them more fully into the work that managers who do earn their high pay know needs to be done.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at: clawton@planningdecisions.com

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