Why Do Managers Believe a Skills Gap Exists?

Why do some company managers and recruiters claim there is a shortage of technical talent, while many experienced engineers claim there is a labor glut? As the very contradiction suggests, we suffer from distortions of the labor market that seem to confuse everyone. Sometimes, this political conundrum is so convoluted that it’s as if there were a cosmic conspiracy at play.

Business Culture Has Confused Technical with Technology

At the heart of this complex issue are a number of important definitions, not the least of which is what constitutes a “technical” (or tech) company and what constitutes a “technology” company?  And correspondingly, what is a “tech” worker and what is a “technology” worker? There are important distinctions.

Most people differentiate technical or “tech” companies from traditional technology companies. They would likely say that IT companies, which provide software products, are tech companies, while historically innovative science and engineering companies (e.g., IBM, DuPont, 3M, General Electric, etc.) are not considered tech companies, but rather technology companies.

In the context of the polemical skills shortage debate, however, representatives from industry (and more recently from academia) have used “tech” and “technology” interchangeably, blurring the definitions to inflate the numbers of job vacancies reported to support their claims of shortages.

This willful (or misinformed) mischaracterization has led to distorted financial markets, and contributed ultimately to misguided public policies which have exacerbated an already unfavorable labor market for qualified U.S. workers.

Today’s American tech businesses are engaged in what one author has termed “ hyper-competition” [1]. Since technical change is the raison d’être for tech companies, it is said that tech products have no more shelf life than yesterday’s catch.

Mangers of tech businesses must hone an uncommonly sensitive nose for change. The faster the rate of change, the more important is that nose. As in classic Greek tragedies, it is this very extraordinary gift, of “smelling what is in the wind” that is their fatal flaw. It is that very sense that leads entrepreneurs to anticipate and fix problems [2] that has led rotten national outcomes.

“Old School” Engineering vs. “No Rules” Dot Coms

The releases of the web browser Mosaic, Intel’s Pentium processor and Microsoft’s NT in 1993 set the stage for the dot com boom. These three innovations were developed with an “old school” approach that relied on highly skilled professionals with classic science and engineering (S&E) education. Their progeny, our dot com boom (1997 to 2000), was an undisciplined child, because, simply said, these dot coms only automated business practices. This type of business was a darling to Wall Street, because it was consistent with a long-term trend of financialization of our economy. This focus was a change from teasing the Gods of chemistry and physics during the American golden age.

Thus classically engineered products at the beginning of the decade led to an entrepreneurial food fight by the end of the decade. Like any food fight, it left a stench of perverted labor and capital markets.

Reengineering Outsourced Hiring

In 1990, Michael Hammer at MIT kicked off an effort to streamline business that he called Reengineering [3]. This effort was promoted by vendors who provided enterprise resource management (ERP) software and consulting firms. One of the many results of reengineering was outsourcing of technical recruiting from within corporations. The net result was disconnected and bureaucratic hiring (i.e., confused recruiters, disappointed managers and frustrated job seekers).

Certification of IT Skills Led to Certification of Everything

While the computing and dot com industries flourished in the 1990s, leaders saw the need for standardizing software skills. Cisco, and others, began or enhanced formal certification programs. These certificates became popular with both employees and employers, and a training industry blossomed. Many of these certifications are now internationally recognized [4].

Outsourced recruiters initially conflated engineering and IT (confusing certifications with ABET accreditation). In time, non-IT certifications proliferated and began replacing long-standing academic credentials in job searches with demands for these newer certifications (making sense for lower-level jobs). The certification bouquet decayed as superfluous certifications proliferated.

The Immigration Act of 1990 Opens the Door to Abuse

The Immigration Act of 1990 opened up a temporary visa termed the “H-1B Specialty Occupations” [5] that has been used to fill the kinds of jobs entrepreneurs needed for dot coms. Ron Hira testified recently that there may be as many as 650,000 H-1Bs working now, and that approximately 120,000 new H-1Bs arrive every year [6]. Many firms have exploited the H-1B to get cheap labor.

Agglomeration of STEM in Education vs. Labor

The STEM (originally known as SMET: science, math, engineering and technology)  acronym was hijacked in congressional hearings in 1997 [7] after the US Department of Education  published a report on poor student performance [8]. The result was that the press and others agglomerated STEM labor categories, mixing quite dissimilar categories of people as if they were interchangeable  factors of production.

Miscue at the National Science Foundation

The National Science Foundation played a leading role, and may be the root cause of the so called “skills shortage” that has recently morphed into a “skills gap.” It began with an unpublished paper by Peter House in 1989 [9-11] .

The Reality on the Ground

The best public source of data on careers is the US Bureau of Labor Statistics (BLS) [12] which says that the Computer and Information Technology industries employ 3.216 million people. Of those only 8.8 percent have jobs requiring a Ph.D., and approximately half of all these jobs do not require a bachelor’s degree. Therefore, IT workers tend to be younger than engineers, because about half of these jobs can begin right after high school.

The BLS estimates a growth of 14% in all occupations in the period from 2010 to 2020. The computer occupations will fare far better at 22% growth. Engineering will fare worse at only 11% (less than the average). Chemistry is predicted to only grow at 4%. Approximately 40% of domestic manufacturing has gone to China, and many of the physical skills within STEM went with it [13]. Furthermore, federal spending on R&D has speedily diminished.


The stars have aligned to confound S&E and IT employment alike. The result is evidence of a worrisome decline in interest by domestic students in what they perceive as dead end S&E careers. This threatens to make the imagined become real.


  1. D’aveni, R., Hypercompetition, 1994.
  2. Dew, N. and Sarasvathy, S., Of Immortal Firms and Mortal Markets: Dissolving the Innovator’s Dilemma, The Second Annual Technology Entrepreneurship Research Policy Conference, Univ. of Maryland, Dec. 2001, http://www.darden.viginia.edu (14 Jan 2008).
  3. Hammer, M., Reengineering Work: Don’t Automate, Obliterate, Harvard Business Review, Jul/Aug 1990.
  4. Cisco, http://newsroom.cisco.com/press-release-content?type=webcontent&articleId=1240408
  5. http://www.uscis.gov/working-united-states/temporary-workers/h-1b-specialty-occupations-and-fashion-models/h-1b-specialty-occupations-dod-cooperative-research-and-development-project-workers-and-fashion-models .
  6. Hira, R., U.S. Senate Testimony, The Border Security, Economic Opportunity, and Immigration Modernization Act, S.744, Hart Senate Office Building, 22 April 2013.
  7. American Geological Institute, Update and Hearing Summary on the State of Science, Math, Engineering, and Technology Education in America (5-4-98) ,https://www.agiweb.org/gap/hearings/smet.html
  8. U.S. Department of Education. National Center for Education Statistics, Pursuing Excellence, NCES 97-198,Washington D.C.: U.S. Government Printing Office, 1996.November 1996.
  9. Mervis, J., Analysts Debunk Idea Of Scientist Shortage, Citing Defects In Current Economic Models, The Scientist, 29 April 1991
  10. Atkinson, R., Ominous Statistic Foretell Drastic Shortage of Scientists, The Scientist, 25 June 1990
  11. Weinstein, E., How and Why Government, Universities, and Industry Create Domestic Labor Shortages of Scientists and High-Tech Workers, http://users.nber.org/~peat/PapersFolder/Papers/SG/NSF.html
  12. Bureau of Labor Statistic, Occupational Outlook Handbook, http://www.bls.gov/ooh/
  13. Pierce, L. and Scott, P., The Surprisingly Swift Decline of US Manufacturing Employment, Figure 5, NBER Working Paper No. 18655, Dec. 2012.

Opinions expressed are the author’s.

Dan Donahoe, MBA, Ph.D., PE, is an IEEE Senior Member, a member of the IEEE CPMT BoG, associate editor of IEEE Transactions on Components, Packaging and Manufacturing Technology, and a member of IEEE-USA’s Career Policy Committee

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