The source of the skills gap isn’t always a lack of skills  (And technology isn't always the solution) 

Posted: April 25, 2024

Our Industrial Life_Newsletter issue 1 Email_Graphics_V3

Lately, it seems like everyone is worrying about a skills gap. In January, the World Economic Forum reported that 60% of companies worldwide cite skills gaps in the local labor market as an impediment to transforming their business.


“That new automation revolution will have a major effect on employment in the coming years. Nearly every job will change, many quite profoundly, and the overwhelming majority of today’s employees will need to develop new skills.”

McKinsey and Company


Companies are quickly adopting technologies like AI, advanced analytics, and digital twins, fueling concern over worker preparedness and adaptability. And with a generation of industrial workers set to retire, many are worried about how to attract new talent and preserve the decades of knowledge and experience held in the minds of those veteran workers.

In a recent episode of our podcast, we explored how some industrial companies are using technology to:  

  • Record and preserve the knowledge of more experienced workers. 
  • Create immersive digital training programs to bring new workers up to speed faster. 
  • Supplement worker knowledge with pattern recognition tools to help address problems that have arisen before. 

But while industrial technology is a critical tool, it is not the full answer. Companies will have to expand their thinking about the cause of the gap and what they can do to help address it.

1. Sometimes a skills gap is really a credentials gap

In many cases, job candidates might have the right skills for the job, but employers don’t realize it because they restrict their search to personal networks and hire based on educational and work history instead of focusing on skills. The World Economic Forum estimates that the world could add 100 million new people to the talent pool simply by hiring candidates based on the skills they have instead of their educational or job history. 

In the context of hiring, technology can sometimes be a hindrance. AI and keyword filtering can cause highly qualified candidates to be eliminated by software before a hiring manager ever sees their CVs, shrinking the applicant pool and unintentionally reinforcing biases.

Taking a skills-first approach not only expands the pool of job candidates —it diversifies it. LinkedIn reports that taking a skills-first approach to hiring for jobs in which women are underrepresented increases the number of women in the candidate pool eight-fold.    

2. Sometimes a skills gap is a PR gap  

Younger workers with the right skills might not put themselves forward because they have qualms about working for organizations that don’t seem to share their values.  

Many younger workers don’t want to work for industries that they view as not doing enough to address climate change. Similarly, 56% of Gen Z workers say they would refuse to work at an organization that doesn’t have diverse leadership. All workers also value their personal safety—and industrial work can be dangerous. If employees can’t see that an employer genuinely cares about their safety and gives them proper work protections, it’s hard to induce them to work for it—even if they have the requisite skills.  

Digital tools can help companies with things like energy reporting, resource tracking, waste reduction, and improving safety. But such tools are no substitute for core values.     

3. Sometimes companies just need to reframe the skills gap  

One of the trickiest parts of the skills gap problem is that the skills that are in high demand today might well not be in five or ten years. And not-yet-dreamed-of skills might be highly sought after. After all, who would have guessed five years ago that LLM prompt engineering would become an in-demand skill? (Or that it might soon become obsolete, further proof that the skills workers need are not fixed but rather ever-evolving.)   

According to a recent survey, employers expect 23% of the current job offerings to change over the next five years. In other words, new roles will be created and existing roles will be eliminated.      

With this much churn, employers will need to move beyond the mental model of the skilled vs unskilled worker and instead start evaluating workers based on qualities like a growth mindset and adaptability to changing working conditions. With the right digital tools in place (again, think tools like AI, digital twins, simulation-based training, etc.) the right worker can grow as a company’s needs and tools evolve.     

By using digital tools to take ownership of worker training and education, employers can adopt the strategy of hiring workers with the wherewithal to continue learning on the job while providing them with the tools they need to do so. 

Our Industrial Life_Newsletter issue 1 Email_Graphics_V3

According to a recent report from Korn Ferry, “By 2030, there will be a global human talent shortage of more than 85 million people, or roughly equivalent to the population of Germany. Left unchecked, in 2030 that talent shortage could result in about $8.5 trillion in unrealized annual revenues.” 

We don’t need to tell you that $8.5 trillion is a lot of money to leave on the table. What will your business do to make sure this problem won’t be left unchecked? 

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