Can Tech Talent Shortages be Reversed?
The global pandemic brought a lot of issues that were health or healthcare industry related. One unexpected outcome was the expanding and speeding up of the labor shortage across all industries, especially tech. What became known as the ‘Great Resignation’ started to take place and is still going on 2 years later.
Having worked in the tech space for a few years, I noticed initially that there was a lot of movement from one job to another. People were shifting from very technical roles to less technical roles, despite their previous experiences and education. During the pandemic, people started leaving tech altogether to pursue something else. When hiring new people, people interviewing didn’t fit the profile needed in terms of skill set.
So why is there a tech talent/labor shortage?
For starters, the pandemic brought to light some issues with workplace culture, such as, toxic work environment, being underappreciated, and non-flexible hours. Digital transformation and technologies that would have taken a few years to complete, were finishing within a year. What was the cost? Tech employees were working longer hours with no added benefit. It is also getting harder for people to enter in certain spaces because of the requirements asked for in applications.
What are the effects?
The tech talent shortage is plaguing today’s economy and affecting thousands of businesses all over the world. According to Korn Ferry, by 2030, the world will see a labor skills shortage of 4.3 million workers and unrealized output of $449.7 billion in the Technology, Media and Telecommunications (TMT) space. In the US alone, the tech industry could lose out on $162 billion worth of revenues annually unless it finds more high-tech workers.
Lack of tech talent in the economy is not a new problem. Over the last decade, more than half the CEO’s identified lack of essential skills as a threat to growth. The skills these CEOs are looking for have changed over time, with tech skills being most in demand in recent times. The skills shortage stymies growth chiefly because it stifles innovation and raises workforce costs. According to a report by Gartner, businesses think that talent shortage is the biggest barrier to the adoption of 64% of new technologies. Talent availability is cited as a leading factor inhibiting adoption among all six technology domains included in the survey — compute infrastructure and platform services, network, security, digital workplace, IT automation and storage and database. The problem is the mismatch between technological advances, including automation, artificial intelligence (AI), and machine learning, and the skills and experience workers need to leverage these advanced tools.
Can it be reversed or fixed?
As companies look to tackle the labor issue, simply increasing salaries will do more harm than good because those salaries will become the new norm and companies will not be able to keep up with the rising costs. Other active measures need to be taken to get ahead of this shortage.
A way to combat the massive skills gap in the technology industry is to teach tech skills at an early age and prepare children for the skills of the future. An education system geared towards imparting problem-solving and analytical skills must be prioritized at an early age in classrooms to make students ready for Industry 4.0. As a study by the Institute For The Future (IFTF) points out, 85% of the jobs that will exist in 2030 have not been invented yet. This means that students entering the university or the workforce now will not have the necessary skills that the industry will look for in the next decade. Recognizing the rapid change and the constant disruption in the tech world, it is no surprise that formal degree programs would gradually lose their significance.
We have begun to see signs of this trend with the emergence of the ‘gig economy’, as more people leave the full-time workforce and are interested in part-time or freelance work. The gig economy will become an ever more important place for tech companies to hire talent from. This, however, is a band-aid solution to the overwhelming talent squeeze felt in the economy. For a more sustainable solution, companies need to look at constantly upskilling/reskilling their workforce.
Companies need to look ahead and consider how the nature of work will change to get ahead of the talent shortage. However, companies have been hesitant in doing so because the cost to train their workforce is too high. Per a 2019 paper from the World Economic Forum and Boston Consulting Group, the estimated cost to reskill displaced US workers is $24,000 per head. Not investing in upskilling/reskilling is costing the companies too. High turnover and new hires cost the average 100-person company approximately $660,000 to $2.6 million per year, according to a study conducted by Gallup. CEOs are beginning to realize this and are increasingly focusing on reskilling/upskilling to fill the skill gaps in their organizations. Reskilling/upskilling is crucial to retain competitive talent and to create a more diverse pool of ideas and individuals within a company. An example of this would be apprenticeships, where people get mentorship for the day-to-day work and then convert into a full-time employee, easing the transition of skill sets. Another method would be to utilize a software called low-code technology, the tech industry can accelerate delivery of work. Automation of various steps of the application lifecycle allows for reduced need of advanced technical skills. Employees could then focus on broader strategies and work rather than struggling with the difficulties of development.
The tech talent shortage won’t correct itself, so companies have to take the right steps to ensure they are able to keep up with the changes.
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