CEOs Say Skills Gap Is Problematic

President Barack Obama speaks to leading CEOs to discuss ways to promote the economy and create jobs on Wednesday at the Business Roundtable headquarters in Washington.

Business leaders say training a pipeline of workers should start as early as kindergarten.

A shortage of adequately skilled workers in the U.S. is a problem faced by most companies and could compromise the country’s economic competitiveness if left unaddressed, a Business Roundtable / Change the Equation survey of leaders of 126 major corporations found. Fortifying a strong pipeline to funnel skilled workers into U.S. companies, business leaders say, should begin as early as grade school.

Almost 98 percent of CEOs said the skills gap threatens their businesses, according to the survey, which was conducted Sept. 9 to Nov. 6. Approximately 60 percent of job openings require basic literacy in science, technology, engineering and math – considered STEM skills – and 42 percent require advanced STEM knowledge, the survey said.

The U.S. News/Raytheon STEM Index shows that STEM employment in the United States has gone up by more than 30 percent, from 12.8 million STEM jobs (as defined by the U.S. government) in 2000 to 16.8 million in 2013, and recent reports indicate the STEM job market is actually far larger than that. Even with the most weight given to the broadest indicators — STEM employment and STEM degrees granted — the Index shows there has been only modest gains in overall STEM activity since 2000, indicating that the existing pool of talent is still too shallow to adequately meet demand.

Businesses have a vested interest in the education attainment of potential workers, Rex Tillerson, chairman and CEO of Exxon Mobil, said at a conference on the skills gap in Washington Wednesday. Failure in the education arena is akin to turning out “defective products,” Tillerson said, and those products “are human beings.”

“When you go to the K-through-12 level, I’m not sure if public schools understand that we’re their customer,” Tillerson said. “What they don’t understand is they’re producing a product at the end of high school graduation.”

There were about 4.7 million job openings in the U.S. earlier this year, according to the most recent figures from the Labor Department. Yet more than 18 million Americans were either not working, couldn’t find full-time work or were marginally attached to the labor market, reflecting a gap in the skills employers need and those that workers possess.

According to the survey, 62 percent of CEOs said they have trouble finding qualified workers for jobs requiring advanced computer and IT skills, and 41 percent reported problems filling jobs requiring advanced quantitative knowledge. Thirty-eight percent said at least half of their entry-level applicants lack basic STEM literacy, and 28 percent said at least half of new entry-level hires lack basic STEM literacy.

The American arm of German engineering giant Siemens, for instance, received about 10,000 applications to work in its new gas turbine plant in Charlotte, North Carolina, a few years ago, but only about a third of the 6,000 interviewed applicants possessed the basic math, reading and technical skills the company required, said Eric Spiegel, president and CEO of Siemens USA.

The company adopted the German apprenticeship model through partnerships with local community colleges in an effort to train a pipeline of workers, but Spiegel says his company faces difficulty “getting other companies to join in, [and we] have discovered there’s a bit of an image problem with manufacturing.”

But STEM careers tend to pay competitive wages, business leaders pointed out at the conference, and there’s growing demand for them. Over the next five years, businesses anticipate they’ll need to replace about 1 million employees who possess basic STEM knowledge and more than 600,000 who have advanced STEM skills, according to the survey.


Corporate leaders Wednesday also emphasized the need for highly qualified grade and high school educators, and for collaboration between the business and education sectors.

Jamie Dimon, chairman and CEO of JPMorgan Chase, said preparing a skilled workforce is “absolutely critical” for businesses and that many children in America’s inner-city schools don’t graduate high school. “You want to wipe out hope and opportunity … that’s a pretty good place to start,” he said.

The Federal Reserve’s Beige Book – which includes economic reports from each of the 12 regional Fed banks – also was released Wednesday and showed that skilled labor was hard to come by in October and November in several Fed districts. This, in turn, tends to pressure employers to raise pay to attract talent.

In Kansas City, for example, “manufacturers reported modest wage gains as they continued to highlight difficulties finding skilled labor,” the Beige Book said. “Respondents noted labor shortages for machinists, skilled construction trade workers, engineers, IT developers and truck drivers.”

CEOs Say Skills Gap Is Problematic