March 1, 2013

State of Alabama
Press Release: Alabama Department of Commerce

Small Business to Uncle Sam: Here's the Help We Need

February 28, 2013 - The Daily Resource for Entrepreneurs

 | staff

The so-called "skills gap" has turned hiring into an increasingly tough challenge. But according to a PayScale survey, businesses aren't interested in one of the biggest solutions on the table.

The talent war is officially on: In 2013, finding--and keeping--highly skilled employees will be one of the biggest challenges for businesses.

According to a new survey released Thursday by compensation research firm PayScale, 65 percent of surveyed companies report that "retaining top employees" is their No. 1 priority this year. And it's no wonder: 35 percent of businesses have had vacant positions open for six months or more because they can't find qualified hires.

PayScale's survey, which gathered data from more than 4,000 companies about their hiring and compensation plans for 2013, highlights the problem of the so-called "skills gap"--the idea that businesses want and need to grow but can't because the American workforce lacks the necessary skills to fill the jobs.

The fact that businesses are feeling that gap more acutely isn't exactly new. But what is surprising in the PayScale findings is how companies think the country should close the gap: They want government help but they say immigration reform isn't the answer.  

Tough to Fill Positions

Though the unemployment rate rose to 7.9% in January of this year, at least 23% of small businesses have had positions vacant for more than six months, according to PayScale's survey. That goes double for larger companies. The problem, they report, is a dearth of candidates with specialized skills. 

“Industries related to STEM [science, technology, engineering, and math] fields are hardest hit by the skills gap,” says Katie Bardaro, lead economist at PayScale. “Workers [in those fields] are in higher demand, but fewer and fewer of those enter the labor market jobless.” The qualified candidates get snatched up early, she says, and demand far exceeds supply.

Silicon Valley, one of the areas that attracts a big chunk of that highly skilled labor force, is well aware of the talent shortage. That's why tech entrepreneurs have become some of the loudest voices advocating for immigration reform and for making it easier for qualified foreign-born candidates to work in high tech jobs in the U.S. Earlier this week, the former heads of AOL and Mozilla as well as several prominent VCs announced their plan to organize a virtual march on Washington to push for big changes in immigration policy. And the tech community has expressed broad support for Startup Act 3.0, the latest version of proposed legislation (introduced Wednesday) that would make it easier for immigrants to come to the U.S. and start companies. 

When it comes to immigration, businesses have two choices, says Michele Keeffe, founder and CEO of the Seattle-based marketing firm BuzzBee. “We can outsource for skilled labor at a lower cost, or we can bring people in to reinvest in our own economy.” Keeffe argues that making it easier for qualified foreign-born employees to connect with eager employers benefits everyone.

Closing the Gap

According to PayScale's survey, business owners have their own ideas about how to close the existing skills gap--and their answers may surprise you. Government aid would be helpful, most companies reported, but not just any aid.

How Government Should Address the Skills Gap

Fifty-six percent of companies overall said they want to see government support in the form of tax incentives to invest in educating and advancing their existing workforce. These types of tax incentives are effective, Bardaro explains, because they offer direct rewards for companies investing in their own employees.

Business owners also want to see an increase in national education spending--presumably to encourage higher graduation rates and post-secondary education--and retraining programs to update unemployed workers’ current skill sets. Thirty-four percent and 33 percent of businesses favored these options, respectively.

Immigration policy reform landed conspicuously low on the list of proposed solutions. Most surveyed business owners do not appear to believe that immigration reform is the answer to their hiring woes--only 14 percent of them considered it an appropriate response.

Why Immigration Isn't the Answer

For some business owners, filling job openings with imported talent--even top-notch talent--is a thorny issue.

“It’s emotionally challenging,” says Jeff Wright, executive vice president of the chemical distribution company TRInternational. “You are essentially saying you can’t find anyone [in the United States] who is qualified. I have a hard time believing that in a country of our size there just aren’t [the right candidates] out there.”

Badaro says she sees a lot of firms suffering from the skills gap but wanting to support the American workforce. To these companies, investing in American workers--even if those workers need to be brought up to speed, so to speak--is preferable to bringing in outside talent in most cases. 

But that's not the only reason why sweeping immigration reform and government investment in education programs aren't high on the priority list for business owners. Some argue that those proposals simply won't offer a solution fast enough--and something needs to be done in the short term.

Wright says giving businesses tax incentives to educate their own employees would encourage and empower business owners to take control of their situation. Instead of waiting for macro-economic changes to have an impact on his business, he prefers the tangible benefit of having more money to invest in employees.

"I would be much more in favor of tax policy changes that allow small business owners to control their own destiny," he says.

Keeffe agrees, though she encourages fellow entrpreneurs to take the initiative rather than wait for government aid.

"If small business is the backbone of the economy, it is also the job of small businesses to bring people in and to train them," she says. "We need to mentor and grow our people."

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