A new book from Wharton management professor Peter Cappelli about jobs and hiring has inspired a reaction from just about every group with a stake in today's workforce: employers, employees, recruiters, academics, media commentators. That's because Cappelli debunks the oft-repeated employer argument that applicants don't have the skills needed for today's jobs. Instead – labor laws notwithstanding – he puts much of the blame on companies themselves, including their lack of information about hiring and training costs and on computerized applicant tracking systems that can make it harder, not easier, to find qualified job candidates.
Director of Wharton's Center for Human Resources, Cappelli talked about his book, Why Good People Can't Find Jobs. Excerpts from the conversation follow.
Knowledge at Wharton (KW): Given the weak economy and bleak job market, you say companies have a bigger pool of job applicants to choose from and can be much more selective, yet they still claim they can't find candidates with the requisite skills. Why?
Peter Cappelli (PC): Employers control everything about the process. They define the job, create the requirements for it, and then decide how the word gets out, recruiting-wise. They set the rate of pay, which helps determine how attractive the job is, and they handle the selection of applicants.
The obvious point is there aren't enough jobs to go around right now, so employers can be picky. But we're not really talking about being picky. The unusual and certainly negative thing is employers who say, "Look, we're just not hiring, or we're waiting a very long time to hire, because we can't find what we want." The place to answer that question is back with the employers making decisions about the process. Are they doing anything wrong?
KW: Clearly they are. There's a mismatch between people looking for jobs and employers saying they can't find people to fill them. Some companies feel they don't have to fill a vacancy, that existing employees [can handle the workload]. But they don't really know when the existence of too many unfilled positions begins to hurt their business, their expansion, their profitability. Isn't that part of the problem, that companies delay hiring and don't realize the hidden costs of that?
PC: The internal accounting systems in most organizations are so poor they can't tell what it costs them to keep a position vacant. They easily know how much it costs to employ somebody, but they can't measure that employee's contributions. So, in most companies, it actually looks like they're saving money by keeping positions vacant. If they think that, obviously [there's] no rush to hire.
KW: Companies aren't paying market wages; they're trying to low-ball the job market. But why should they pay market wages when they can get employees cheaply?
PC: The thing is they can't. That's what they're claiming, right? A Manpower survey asks employers if they're having trouble finding people to hire. In that survey, about 11 percent say they can't get people to accept jobs at the wages they're paying. So 11 percent are saying we're not paying enough. The real number is probably double that. We're not very good at identifying problems we create ourselves. If they're not finding [employees], don't call it a skills gap; don't call it a skills mismatch – you're just being cheap.
KW: A huge part of the so-called "skills gap" comes from the weak employer effort to promote internal training for either current employees or future hires. Correct?
PC: Right. The story that one hears, particularly around the policy community, is that schools are failing and kids aren't coming out with the right academic degrees and the right knowledge. If you actually look at the data from employers themselves when they report problems they're having with recruiting, they never talk about academic skills as being near the top of the list. In fact, their complaints have been consistent for the 30 years or so I've been looking at this. And their complaints are the ones, frankly, that older people always have about younger people: They're not conscientious enough, their workplace attitudes are not diligent enough, they don't want to work hard enough. They're not actually looking for young people out of school at all.
They want experience. Everybody wants somebody with three to five years of experience. What they're really after are the skills that you can't learn in a classroom, skills that you can only learn by doing the job itself. So the craziness about the hiring requirements is that in most cases, employers are looking for somebody who is currently doing exactly the same job someplace else. That's partly why they don't want to look at an applicant who is currently unemployed. They want somebody who is currently doing the same job right now.
The problem is, nobody wants to give those people right out of school any experience. Nobody wants to train them. It's creating this skills problem, because nobody wants to give people that initial experience. You can pay them less while you're training them. You can require that they get some skills before you engage them. But because of the accounting systems, employers, for the most part, have no idea what it would cost them to train somebody. They have no idea whether they're actually saving money by trying to chase these people who already have jobs and hire them.
KW: There's discrimination against unemployed job applicants for a number of reasons. Maybe companies feel they aren't up to date on their skills; maybe they're older workers. Is there any way around this, short of federal regulations that bar such discrimination, which would be difficult to enforce?
PC: For the most part, older workers have everything those employers say that they want in new hires – better work attitudes; experience; they don't need ramp up time; they don't need training or as much training – and yet, there's still widespread discrimination against older workers, even with laws against it. The employers [need to] understand their own self-interest. It's not in their interest to chase the same small group of people who already are employed someplace else. It makes sense to train people. It makes sense to give people a chance, to be more realistic about what your job requirements are so that you can fill positions.
[Wharton management professor] Matthew Bidwell has done an interesting study comparing people who were hired from the outside to people who were promoted from within. those promoted from within do much better on cost and productivity accounts. That doesn't mean you should never hire from the outside, but it can pay off to develop from within. Employers need better information.
KW: A lot of applicants for jobs have learned how to game the system in terms of putting in the key words they need to add to their resumes or cover letters. It seems as sophisticated as software systems are, there are ways to get around them.
PC: Those who can game the system – you'll see them make it through the application process, and the people who don't know how to game the system, you never see them. But is that really who you want to be hiring?
KW: You blame the press for preferring to write stories with headlines like, "Companies Have Trouble Finding Skilled Workers," as opposed to "Companies Ecstatic over New Hires." The press isn't likely to change. So how does one get the facts out there?
PC: When you look at the real data, you see there's no truth to these claims. Employers are not doing what these anecdotes suggest. The skills gap story is the [companies' own] diagnosis. In fact, it's typically the case that employers' requirements are crazy, they're not paying enough, or their applicant screening is so rigid that nobody gets through.
[In terms of technology,] there are always some jobs that require new technologies. There are always some jobs that don't. If you look at the array of jobs in the U.S., you see two poles: There are some high-scale jobs increasing in demand, and there are some really low-scale jobs like health care and home health care workers that are really increasing in demand. Overall, there's not that much change. We talk about computers and IT being so important now. But personal computers came to the office 30 to 35 years ago now.
If we think about how older folks used technology, it's really the same, right? The difference is young people talk to their friends 24 hours a day and we talk to our friends kind of rarely. [Young people] are more intensively using things we're paying attention to. But we use them, as well.
KW: What are two or three things that could alleviate the skills-gap problem?
PC: If I were an employer, I'd first ask what it's costing me to keep a vacancy open. It's costing me something. Searching forever for somebody – that purple squirrel, as they say in IT, that somebody who is so unique and unusual, so perfect – that's not a good idea. We ought to revise our hiring requirements and just get somebody in there and start doing the job.
KW: What would you advise employees?
PC: If you're looking for a job, to a large extent it's not your fault that you don't have one. There just aren't enough jobs for the number of people looking for them now. Don't take it personally if you can't find a job. And given how automated things are, the best advice is to see if you can get to a real person to make the case about why you have the skills. Put yourself in the shoes of hiring managers who understandably want to minimize their risk, and want to find somebody who is really motivated to do the job.