https://www.linkedin.com/pulse/workforce-development-could-societys-best-chance-gap-mario-barosevcic/
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Higher education, vocational education and bridges to employment have an important role to play in tackling the $8.5Tn skills gap, which is forecasted to represent 85m unfilled jobs globally, by 2030, due to a lack of skilled labour. They are increasingly important for those looking for first jobs and new industries, especially now with an estimated 195m FTE jobs reduced by Covid globally in Q2 of 2020.
Workforce development, however, while difficult, we believe could be the most effective way to solve the skills gap. It represents solutions that further existing employee skills whilst supporting the company to achieve faster and better business outcomes. It means investing in existing staff, rather than losing and firing employees and relying on other entities to provide new hires.
The skills gap is felt most directly by employers, in particular during Covid as shortages of digital skills have become even more apparent in new working environments. It is employers that are closest to the problems and should know best which skills are in shortest supply. It is employers that can most readily offer and embrace applied learning environments that trump theoretical learning offered by education institutions that are slow to innovate and respond to industry needs (as per our research on Mass Collaboration between Employers and Universities).
Workforce development is key to our collective economic future, yet we are far from the reality of predictable and continuous reskilling and upskilling. Amongst all of the activity and transformation in education, workforce development is the furthest behind. Only 3 of the 19 education unicorns (private companies valued at $1bn+) operate in this space, 2 of which are fundamentally a conduit for academic-driven learning as a solution to corporate problems. Image below from Holon IQ:
Chief executives and company leadership view the unavailability of talent and skills as their biggest business threat. Without adequate solutions, it is a threat that will persist and accelerate given the average skill shelf life continues to decline and the importance of new digital skills accelerates.
“People are our greatest asset. The business environment and our clients’ needs are changing rapidly, so we need to ensure that our employee skills are evolving at that pace too. To do this we have build the EY Tech MBA by Hult. Our MBA is future-focused — with a constantly updating curriculum, flexible — where employees can learn at their own pace and evidence learning through badges, and free for all employees — having a democratising effect.” — Riaz Shah, Partner, Global Learning at EY
Below is a snapshot from Udemy’s most popular courses, showing how the relevant skills of today are completely being replaced by new skills that are increasing in popularity, as the average skill shelf life is below 5 years.
At least $240bn is spent per year on corporate training and the spend has been trending upwards. Of this spend, however, a small proportion currently goes towards technology and genuine upskilling and reskilling. 40% is generally allocated to compliance, 30% towards ancillaries such as travel, and a large part of the remainder goes towards LMS e-learning content. Only $20bn of the $240bn is spent on digital learning solutions. The average total training spend per employee is just under [$1500](https://www.statista.com/statistics/738519/workplace-training-spending-per-employee/#:~:text=In 2018%2C employers spent approximately,employee on learning and development.) per year, less than 2 months of the cost of their office rent.
Many of the existing workforce development solutions are still just scratching the surface in terms of customer penetration. One of the largest providers, Cornerstone has 75m users, Linkedin learning has 14m, Degreed has only 250 clients and 4m users.
Considering the 85m jobs that are estimated to be unfilled due to talent skills shortages by 2030, if on average $15k (estimated range from $5k to $25k depending on the job) was spent on upskilling or reskilling per employee through workforce development alone to eliminate just this gap, the total additional spend of $1.275tn (85m x $15k), or $250bn p.a. assuming a 5-year role shelf life, would still seem pale compared to the estimated $8.5tn in expected company lost revenues per year. Assuming existing workforce development spend stays $240bn, additional targeted spend on reskilling and upskilling to eliminate the skills gaps could easily double the market size by 2030.
Even before Covid, according to the Linkedin Learning report 2020 (image below), the proportion of spend on digital has been increasing, whilst the proportion of in-classroom, instructor-led training has been decreasing. This all points to the much needed move, for a sleepy industry, beyond inefficient training spend into more effective upskilling and reskilling.
“L&D has suffered from limited budgets and – often – limited vision in their organisations. The shift from physical to online delivery represents a real possibility that we are moving to a more innovative, business-focused future for the industry” — Donald Taylor, Chairman of LPI (Learning and Performance Institute)
Some investors are concerned, that during the last recession L&D spending fell, and are hesitant to invest in workforce development. The immediate short term will carry its challenges to the overall market, given tighter budgets and greater availability of talent. We, however, think Covid, despite many challenges, could have a net positive impact on technology workforce development spend given Covid further accelerating budget shifts from physical to online, and the growing needs and pressure on company and government shoulders to acquire skills and develop talent, which will resume once economies recover.