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The Talent Gap in Critical Industries
Within the US economy a profound challenge is reshaping the dynamics of various critical industries – talent shortages. This phenomenon, which spans across areas such as healthcare, civil engineering, transportation, manufacturing (traditional and high tech), and education, is not merely a transient hiccup but a systemic issue. At the heart of this challenge is a complex interplay of factors. The retirement of baby boomers, shifts in the educational focus of younger generations, and an ever-increasing skills gap exacerbated by rapid technological advancements have all contributed to this predicament, among many other industry specific factors. The tech sector also faces a dearth of skilled workers in emerging fields like AI and cybersecurity, which are crucial for maintaining competitive advantage in the global market, a topic we have written about often.
The impact of these shortages is multifaceted and far-reaching. Companies are experiencing increased operational costs due to the need for higher salaries to attract scarce talent and the expenses associated with longer recruitment processes. There’s also a significant loss in productivity and innovation, as positions remain unfilled and current employees are overburdened. This scenario is not just a corporate dilemma; it trickles down to affect the national economy. For instance, in the manufacturing sector, the inability to fill positions can hamper production lines, leading to decreased output and affecting the overall supply chain. And most recently, this week the FAA announced a formal investigation into the Boeing 737 Max 9 after last week’s terrible incident where a cabin panel completely fell off an airplane while it was in flight. The issue – loose parts:
On Monday, both Alaska and United said they had found loose parts on multiple grounded aircraft during preliminary checks, raising new concerns about how Boeing’s best-selling jet family is manufactured.
Add to this the very concerning data from the NASA database about the number of near collisions involving commercial airlines, and a picture starts to emerge about faltering safety standards. This is surely a failure of both leadership and talent. Not that airlines aren’t safe statistically, but it is worth noting how many pilots and air traffic controllers have started speaking out about what they view as deteriorating conditions. As Jeff Bezos has famous said, “The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right.” There have been articles going back years about pilot and air traffic controller shortages. The pandemic made things worse and now it seems as if things have reached a breaking point. The FAA has 1,000 fewer fully certified controllers than a decade prior, is on pace to add less than 200 over the next ten years, and this is definitively causing issues.
There is plenty of data about which other industries are facing talent shortages and what the extent of these shortages are. The oil & gas industry, for example, is facing shortages across welders, rig workers, heavy equipment operators, and engineers:
- Undergraduate enrollment in a survey of mainly US petroleum engineering courses has fallen from 7k in 2019 to 4k last year.
- Worldwide membership of the Society of Petroleum Engineers fell from 168k in 2015 to 119k in 2022. The average age of members over this period increased three years to 48.
Civil engineering is in a shortage too, where the BLS is expecting a need for 25k new civil engineers each year through the end of this decade just to replace retiring workers – not accounting for the number needed to expand capacity. It’s been well documented that US bridges, factories, and highways are in desperate need of repair – a serviceable level of civil engineers is just one piece of this puzzle. We see similar issues in other sectors too: in healthcare, by the end of 2022, the nursing shortage was ~1.1mm after 500k nurses left the field. As many as 2.1mm manufacturing jobs will be unfilled through 2030, potentially costing the economy ~$1T. And in 2018, the US was short approximately 110,000 teachers, a gap expected to nearly double by 2025. These statistics paint a vivid picture of the current state of talent shortages in various sectors and the growing significance of software and automation as both a challenge and a solution in this landscape. The data underscores the urgent need for strategic planning, investment in technology, and a focus on education and training to adapt. The challenges leading to our current situation, including the aging populations we’ve previously written about, are persistent and unlikely to diminish in the near future. Although several areas like regulatory frameworks, funding mechanisms, corporate hiring practices, and educational systems are all due for modernization, we believe that these measures, while necessary, are not adequate to fully address the issues at hand. These industries with talent shortages will need software (and software-enabled hardware) to get them there. This isn’t surprising, but we believe that the extent to which we will see further software penetration is vastly underestimated.
We are already seeing certain types of software play a crucial role in enhancing productivity, optimizing resource and data management, and bridging the skills gap. For example, one of Conversion’s Venture Partners, Troy Bannister (Founder of Particle Health), recently wrote about how API infrastructure and new regulations are finally bringing about the death of the fax machine across healthcare and delivering modernized data sharing for healthcare organizations. In manufacturing, next-generation ERP systems that more adeptly synchronize siloed data and enable AI-assisted decisioning are compensating for the lack of skilled labor within data operations. In education, online learning platforms and AI-driven educational tools are providing support to educators and enabling personalized learning experiences for students. We recently funded a company addressing this exact issue (Schoolhouse). There are many such examples in every sector where a shortage has emerged. Of course, the integration of these technologies is not without its challenges, especially if they require a rewiring of traditional workflows or user preferences – and regulatory issues are an especially difficult obstacle. There is a need for significant investment in training and development to ensure that the existing workforce can adapt to these new tools. But still, they are absolutely necessary if we want to fill talent gaps. These shortages in the US’ critical industries present both a challenge and an opportunity. While they currently pose significant hurdles to economic growth and innovation, they also prompt a much-needed evolution in how we view and integrate technology in the workforce. This forthcoming era is poised to fundamentally alter the role of human involvement in numerous workflows, or as we have written before, usher in a “Co-Pilot economy.”