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According to the latest Bureau of Labor Statistics data, there are 4.6 million job openings coinciding with 9.5 million unemployed Americans. It's clear we have a hiring problem on our hands.

Although there's been promising signs of economic recovery such as the number of job postings increasing by 16.5% from last year, discouragingly, the hiring rate has remained stagnant.

Why are companies still not hiring?

Source of original image: fivethirtyeight.com

Ask a typical job seeker and they'll tell you, "I have the right skills but no one will hire me!" Ask a typical employer and they'll tell you, "There are just not enough skilled workers!"

Why the disconnect?





Examining the data, I explain why the "skills shortage" is the biggest lie in hiring.

The Claim

"There might be enough job candidates overall, but there aren't enough job candidates for the positions I'm hiring."

The Data

Comparing the number of job openings reported by the Bureau of Labor Statistics with U.S. Census data on the number of people who are unemployed by industry, there are more unemployed people than jobs in every industry.

In Canada, an initial government report found a "serious shortage of skilled workers" but analyst after analyst examining the data couldn't replicate this elusive skills gap. The culprit? An error in the initial data collection that counted a job opening posted to different job boards twice and even three times. When this error was corrected, the skills shortage disappeared.

The (Modified) Claim

"Okay, fine. There may be enough job candidates for the positions I'm hiring, but these candidates just don't have the skills I'm looking for."

The (Additional) Data

While this might sound plausible on the surface, data from the Bureau of Labor Statistics found no evidence of a mismatch of skills with job vacancies.

Even within the coveted science, technology, engineering, and math (STEM) sectors, a look at the numbers reveal that, overwhelmingly, the supply of qualified job candidates is greater than the demand.

Furthermore, research demonstrates that employers are more likely to interview a job seeker without relevant industry experience than a job seeker with relevant experience but who's been unemployed longer than 6 months. Puzzling behavior for people claiming there's a dire skills shortage.

So what's really going on?

The Truth

It's a wage gap. The basic law of supply and demand tells us that wages should be substantially increasing in occupations with a shortage of skilled workers. Data from the Current Population Survey, however, reveal that "in no occupation have average wages even kept pace with overall productivity growth over this period."

A couple of choice quotes that sum up the situation:

Trying to hire high-skilled workers at rock-bottom rates is not a skills gap.

-Boston Consulting Group





Every time you hear someone say 'I can't find the workers I need,' add the phrase 'at the wage I want to pay.'





-Economic Policy Institute

Unrealistic and overly restrictive hiring practices. Wharton Professor Peter Cappelli's interviews with hiring managers reveal that hiring is dominated by "procedures that screen out anyone without precisely the right academic qualifications, job descriptions that include so many different roles that finding one person to fill the slot is practically impossible, and employers who aren't willing to hire people without specific past job titles, even if those people are otherwise experienced enough for the job."

The Solutions

Pay fair wages. Employers, you're already getting the most educated and technologically advanced labour force in history. Please don't be shortsighted: The average cost of a single turnover is 21% of an employee's annual salary and up to an incredible 213% for more senior positions. The savings in hiring costs and lower turnover (LinkedIn's research reveals that higher wages is the third most cited reason employees leave a job) more than make up for the increase in payroll.

Fix your hiring criteria. If you're ignoring job candidates because they're too young, too old, too qualified, too unemployed, or too job-hoppy, then you're acting on unfounded assumptions. There is no evidence that these "red flags" correlate with how well a person will actually perform on the job.

We need to acknowledge that long-term unemployment (i.e., longer than 6 months) and "job hopping" merely reflect the realities of today's workplace - these circumstances are often completely out of the job seekers' control.

Employers who are smart enough to tap into these neglected talent pools will create a huge competitive advantage. Let everyone else fight over the same passive, already-working-at-a-competitor job candidates.

Use data-based methods to assess job candidates. Surveys reveal that 49% of people lie on their resumes. Research tells us job interviews are a poor predictor of future job performance. Everyone knows resumes and interviews are unreliable but everyone uses them anyway. So why are we still relying on these inaccurate methods to make hiring decisions?

Instead, take advantage of the research showing us what the best data-based methods of hiring actually are. Research featured on the Harvard Business Review found that compared to human judgment, an algorithm increases the accuracy of selecting productive job candidates by more than 50%.





The best ways to add objectivity, fairness, and accuracy to your hiring process?

Psychometric assessment of personal characteristics, which can account for 25% of the differences in job performance (that's a lot!) and structured interviews, which are up to twice as effective at predicting job performance than unstructured ones.

If you're an employer who just doesn't want to increase wages, or you are holding out for the perfect candidate, then that's your prerogative.





Just don't call it a "skills shortage."

Ideal builds recruitment automation software that talent acquisition loves. Ideal’s AI can instantly screen and shortlist new candidates, uncover strong past candidates who are a great fit for a new role, and initiate candidate contact. Companies use Ideal to sift through the resume noise and instantly identify who to interview, all within their existing ATS. Learn more at www.ideal.com.