The Skills Gap in Texas: Three Steps CEOs Can Take to Close the Gap

June 8, 2015

By Amy Holloway

This is an excerpt from an article featured in Texas CEO Magazine.

Texas has been an economic juggernaut during the past decade. Between 2004 and 2013, the Lone Star state was responsible for one out of every three jobs created in the US.

Perhaps even more impressively, Texas avoided critical shortages of workers despite its spectacular economic performance. By investing in human capital at home and attracting talent from outside its borders, Texas provided new and expanding businesses with the workforce needed to compete globally. The state’s community colleges have ramped up degree production to an unprecedented level. The number of associate degrees awarded in Texas increased 75 percent between 2004 and 2013. A simultaneous increase in awarded bachelor’s and master’s degrees was complemented by the state’s unrivaled ability to attract skilled workers. In the past five years alone, more than 125,000 college-educated individuals have moved to Texas on a net basis – more than any other state.

Trouble Brewing

As any business executive knows, however, past success is no guarantee of future performance. Signs of trouble are beginning to emerge. In December, the Federal Reserve in Dallas reported companies in industries as varied as construction, energy, financial services, and law “continue to note difficulty in finding skilled workers.” By February 2015, the state’s already low unemployment rate fell to 4.3 percent, a level unseen in seven years.

The state’s workforce is among the country’s youngest. Texas, however, cannot entirely escape the greying of America. With the youngest Baby Boomers turning 50 last year, the generation that once proclaimed “never trust anyone over 30” is starting to face retirement. Texas manufacturers are likely to experience the most immediate shortages. In sectors such as aerospace, chemicals, and petroleum production, more 25 percent of all workers are 55 years or older. Potential workforce shortages could also extend to many professional services fields. In areas such as architecture, engineering and law, more than 20 percent of all workers are 55 years or older. In addition to normal worker attrition, many firms will soon face the possibility of losing a quarter of their workforce, including some of their most experienced professionals.

While there is debate about the existence of a pervasive skills gap in Texas, there are notable shortages in some specific fields. Take the much-discussed demand for Science, Technology, Engineering and Math (STEM) talent. During the past decade, the number of mathematics and statistics degrees awarded in Texas rose less than 15 percent. During this period, the number of computer and math jobs in Texas increased nearly 45 percent. The result is full employment for computer and math talent. (The current unemployment rate for computer and math occupations in Texas is just 2.2 percent.) With an unemployment rate of only two percent, the labor market for architecture and engineering occupations in Texas is even tighter.

Due to a tight labor market, retiring baby boomers, and shortages of certain skillsets, the ability of Texas businesses to find ample qualified workers could be tested in the upcoming years. Failure to adequately prepare for this emerging reality will limit the capacity of Texas businesses to grow and also put upward pressure on wages.

What Texas Executives Can Do

While educators and state policy makers must do some heavy lifting to increase the supply of qualified workers, industry leaders have a role to play as well.

1) Share information about hiring needs with educators. If the business is experiencing a workforce shortage, or predicts that it will in upcoming years, ask the industry trade association to survey and quantify skills gaps. Outsource the research to a third party research firm to ensure confidentiality. With a strong baseline of research – using numbers not rhetoric –there will be a powerful advocacy tool that will help area educators and policy makers make much more informed decisions.

2) Promote career opportunities in the industry. Despite a projected shortage of millions of workers over the next decade, younger Americans are disinterested in certain types of jobs, particularly those in manufacturing. According to a recently released survey by Deloitte, Generation Y respondents ranked manufacturing dead last among seven industries as a possible career choice. Manufacturing’s lack of appeal is often based on outdated stereotypes as a dirty and declining industry. In contrast, U.S. manufacturing today is innovative and vibrant. Between 2010 and 2013, Texas manufacturing jobs grew at a faster rate than retail employment. The average annual manufacturing wage in Texas is approximately $68,000, or $40,000 more than retail. Would young people have such a dim view of manufacturing if they knew the facts? Exposing young adults to career opportunities though communications campaigns, apprenticeships, internships, and on-site tours will ultimately help broaden the state’s talent pipeline.

3) Tap into state programs to make training more affordable. The cost of training employees can seem unwieldy for many businesses. The Texas Workforce Commission’s Skills Development Fund helps companies defray those costs. The Fund provides grants to businesses that partner with a public community or technical college to create a customized training program for their employees. In 2014, the TWC funded 63 Skills Development Grants with an average award of $668,474. The TWC also offers special programs for small businesses and training veterans. Contact the regional Workforce Development Board or economic development organization for help with the application.

Read the full article in Texas CEO Magazine.