What the Widening Talent Gap Means for Today’s Business Leaders

New approaches are required to attract and retain outstanding workers.

The competition for top talent is not letting up in the U.S. Demographic growth trends, generational shifts, lack of relevant training and cultural views on work continue to widen the talent gap. In August, the U.S. Bureau of Labor Statistics (BLS) revealed there were 10.7 million job openings and a record margin of five million between the number of available jobs and unemployed workers. This gap remains at a near multi-decade peak, and there are still nearly two job openings for every unemployed person.

Even amid historic inflation rates and market instability, results from Deloitte’s June 2022 survey of CEOs show that this labor shortage remains a top concern among business leaders. Likewise, McKinsey found that nine out of 10 executives and managers say their organizations either face skill gaps already or expect gaps to develop within the next five years. The widening talent gap provides opportunities to target emerging and untapped labor pools to make more informed real estate and location strategy decisions.

Key Drivers of the Talent Gap

Several factors are spurring the growing divide between open positions and those who can fill them. Some of these changes have long been forecasted, such as the large generational shifts, but some sprang up due to the workplace transformations that took place with the onset of COVID-19.

According to a 2012 report from the Social Security Administration, 10,000 baby boomers reach retirement age every day, with a much smaller portion of Gen Xers in the population to replace them. The U.S. birth rate has consistently fallen in recent years, and there were 1.53 million more people born between the years 1952-1961 than 1992-2001, according to a 24/7 Wall St. review of data from the Centers for Disease Control and Prevention’s National Vital Statistics System.

In addition to shifting demographics, there is an overall decline in labor force participation. In 2021, the U.S. Department of Labor reported that more than 47 million Americans left their jobs as the marketplace experienced “The Great Resignation.”

Data from the U.S. Census Bureau shows business license applications are up about 50% from pre-pandemic levels as labor pool participants have elected to start their own businesses. Now, organizations are competing with their former top talent, who are leaving to start their own ventures amid the high level of disruption and opportunity in newer markets such as social media, e-commerce, freelance platforms and more.

Another factor contributing to the talent gap is the rate of digital transformation outpacing the growth in technical talent. This creates higher demand for experts in all things digital, including marketing, cloud computing, and data security and analytics. According to Deloitte, 74% of CEOs reported that their companies are undergoing or preparing for a large-scale digital transformation as demand grows for white-collar jobs in professional and business services, finance, and information.

Labor Market Trends

Examining key labor market trends reveals a lot of information about current talent gaps. According to the BLS, white-collar occupations have pushed job openings higher over the prior year, with 2.8 million openings due to digital transformations. While there is still a significant shortage of blue-collar workers, labor constraints are shifting up the value chain. Companies are turning to technological solutions, such as artificial intelligence and automation, to build immunity to the manpower deficiencies felt in the months following the onset of the pandemic. The information industry saw a 70% increase in job openings over the prior year, and financial services saw a spike of 52%.

Blue-collar occupations have seen the largest drop in the job-openings rate. This is largely driven by a decline in manufacturing and trade, transport, and utilities positions from historic levels in 2021, though the market remains tight.

Despite these differences between blue- and white-collar jobs, every industry has a job-openings rate above 4%, and all but three have seen an increase in the job-openings percentage over the past year. Education and health services, business and professional services and trade, transportation and utilities account for more than half of all openings.

Regionally, the South and Midwest have the highest job-openings percentages and have seen the greatest growth in job openings. Affordable, second-tier markets such as Jacksonville, Tampa, Cincinnati and Charlotte were all major population gainers in post-COVID migration trends and were big contributors to job growth in those regions.

Adopting New Talent Growth Strategies

Business leaders recognize that finding and recruiting top talent in these unprecedented market conditions requires new approaches to successfully mitigate shortages and bridge the workforce gap.

Flexibility continues to be critical in the post-COVID landscape, and more organizations are striving to provide additional options in work times and locations for employees. Hybrid or flexible work schedules give employees enhanced lifestyle benefits, such as more time in the day to maintain the home, complete yard work or cook. Removing some of life’s frictions outside of the office can boost satisfaction in the workplace.

Increasing employee engagement through training and skill building, as well as cultivating diversity in the workforce, are new focus areas for many companies looking to fill skill gaps. Employer brand activations for enhanced training and engagement could include providing onsite training, starting/expanding training programs to help improve the skills of new hires, hiring external workforce (temps/independent contractors) to help with the workload, increasing compensation, and improving retention efforts for current employees. A survey from Fortune reported that 70% of employees who receive digital skills training say they are more engaged at work, and 60% say they are more likely to stay in their jobs.

According to Salesforce, three out of four workers do not have the digital skills needed by businesses, yet only 28% are participating in training programs today. This leaves a lot of room for companies to grow their training implementations and requirements with employees.

Bolstering the Talent Pipeline: The Three C’s

While the past two and a half years have been rife with unpredictability and volatility, one certainty is that the talent gap is not going to swing back anytime soon. In this time of tightening labor availability, cultivating a robust talent pipeline is a key pillar of future operating success.

One way to bolster future talent is by applying the principle of the “Three C’s,” which is a feedback loop between companies, communities and colleges. The symbiotic relationship of these institutions and the integration between educators, students, communities and companies can transform an area’s job market.

The Three C’s is a data-driven approach used by colleges and communities to understand in-demand skills and fill the gap between existing skill supply and demand. Life sciences and technology, probably the two most human-capital-intensive industries on the planet, illustrate the Three C's in action. For example, Boston’s thriving life sciences sector is the direct result of the research and development happening in nearby world-renowned institutions, such as Harvard and MIT. On the West Coast, tech’s synergetic connectivity between educators, entrepreneurs and employers in Silicon Valley and nearby Stanford serve as a model for the power of this ecosystem.

The communities, colleges and companies that can adopt and adapt these critical partnerships fastest will thrive in this hyper-dynamic environment. Areas with advanced workforce development programs, such as Texas, Arizona and Ohio, are also reaping these benefits.

With the potential of a recessionary period looming on the horizon, those who not only try to mitigate this widening talent gap but also proactively look to close it will build a level of resilience that will leave them well-positioned to weather any storms.

Bret Swango is senior vice president, workforce analytics and location strategy for Colliers. Additional contributions from Colliers staffers Chris Zlocki, head of client experience, occupier services and Kellen Staats, client experience analyst, occupier services.