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What's Really Behind The Skilled Labor Shortage?

March 23, 2021

The average master electrician in San Rafael, CA makes a little over $90,000 a year. It is a well-paid job, especially considering that it requires no college degree or student loans.

This is not some rare fluke in the economy: you don’t need a college degree to earn double the US median income. Nursing, welding, & solar panel installation jobs are projected to grow at double-digit rates in the next decade, pay $60k - $100k (even at the entry levels) and don’t need a four-year degree.

These are good jobs; the problem is that we aren’t getting enough people to do them. For every 5 electricians that retire, only 3.5 are coming into the workforce.

Why?

I believe there are two main reasons.

The first reason is that the jobs that most need doing aren’t always the ones that the education system is set up to prepare people for. We are creating a supply and demand mismatch that is causing the US to inadvertently slip into a skilled labor shortage.

The question then becomes: "Why does this mismatch exist?"

Because the incentives for traditional education systems are not aligned. The system is already intoxicated by student debt and credential inflation. That is, traditional higher education needs more credentials, more students, and higher costs to survive. They can't suggest you can earn a good living without a college degree. They don't care if their students find a job that allows them to sustain themselves. Most universities don't care about what you do in college as long as you pay for college.

I am not saying that every degree is worthless. I am a strong advocate for long structured education for jobs where mistakes can be very costly. Doctors, engineers, certain programmers, and lawyers must know the implications of their actions. What I am saying is that almost all institutions don't care if your degree is worth something or not. That is your problem, not theirs.

Despite all this, I still believe there is hope for educational institutions. There is a new generation of actors who are putting employability first and credentials second.  These actors are training people for high-demand jobs that will be able to sustain them and they are using alternative funding sources (like Income Sharing Agreements) to pay for the education. Some of these educators are even pairing up with companies to create programs based on the companies' necessities down the line. It is a win-win for the student and the employer! By changing the incentives in the system they are filling jobs faster and cheaper. Lambda School, Guild Education, and Workrise are all good companies implementing alternative models.

The second reason is that most workforce innovation happening today is focused on the familiar problems of office workers. Over the last 12 months, we have seen the proliferation of "future of work" startups that tackle issues such as workplace collaboration, employee engagement, and messaging technologies. While these are all meaningful problems innovators are not looking at the future of work from a demand & supply perspective. Don’t get me wrong: I love startups like Hopin, Otter, Figma, etc. but their vision of the future of work is only relevant for a minority of the workforce. The real problem is the upcoming reorganization of large industries such as healthcare and construction.

We need to focus our energy and dollars on reimagining how large industries will change and train our workforce around that. A couple of job areas where we need to train for the future are:

  1. Counselors & life coaches for chronic illnesses such as mental health, diabetes, and high blood pressure.
  2. Solar technicians to transition our energy matrix to renewable energy. There are over 50,000 solar jobs created every year. We need to train & deploy talent at incredible rates if we want to beat climate change.
  3. Elderly care for the generation that is about to retire. With 1 in 5 Americans being of old age by 2030, we will need lots of workers that can help take care of that population.
  4. Software engineers that can help digitize our processes. Out of the skilled labor shortages facing the US, we are addressing this one the most but much to do still remains.

As ice hockey star Wayne Gretzky famously said: “We need to skate where the puck is going not where it has been.” We need to prepare for the war we are about to fight instead of the battles we have already won. The skilled labor shortage is no different. We need to align the incentives in our education system and focus on training the workforce of the future.