The ‘Skills Gap’: Is Higher Ed Delivering what Employers Want?

Does higher education have a ‘value’ problem?

College grads make more than those without a college degree and stay employed at higher rates than those without the credential.  That sounds good but are college graduates really ready for the workforce and a successful career?  Many employers don’t think so - only 44% of employers strongly agreed that college graduates were prepared to succeed in entry-level positions while 41% strongly agreed they were prepared to advance in the company in a 2023 AAC&U study.

On the other side, students and faculty believe college grads are far more ‘career ready’ than employers do.  This difference in preparation/expectations has been termed the ‘skills gap’.  (There is a much broader question about whether higher education is providing enough of the right majors – sometimes termed the ‘skills mismatch’ - we will deal with this question in a later post.)

While we believe some of the criticisms of higher education are dramatically overblown, this disconnect between how college grads are prepared and what the work world wants and needs is real.  Higher ed can do better.  We will dig into this purported ‘skills gap’ in our next few posts – what is it, what evidence is there a skills gap exists, and importantly, why does it exist?

What is the ‘Skills Gap’?

Like underemployment, charges of a ‘skills gap’ or a ‘skills mismatch’ date back to at least the 70s and Richard Freeman’s book The Overeducated American.  Much attention is on the ‘professional skills gap’ (called ‘soft skills’ by many, a term not indicative of their importance): the difference between new entrants’ perception of their professional skills and the actual level of professional skills possessed by new entrants. A 2023 National Association of Colleges and Employers (NACE) survey is typical: 85% of college graduates surveyed rated themselves proficient with respect to ‘professionalism’ and 79% rated themselves proficient at ‘communications’, comparable figures for employers were 50% and 55%. 

We think the skills gap is broader than professional skills and like the idea of ‘employability’, defined as a student’s combination of hard skills, professional skills, and personal attributes.  Focusing on a student’s ‘employability’ lets us bring in the core curriculum, specific academic preparation in a major, professional skills, and personal attributes – all of which ultimately determine whether or not a graduate is ready for the work world and a successful career.  Unpacking the skills gap in this way provides insights into where the gaps in preparation exist and what can be done about them. 

Does a Skills Gap Exist?

While some question the existence of a skills gap, there is plenty of evidence of a disconnect between the preparation of college graduates and what employers want.  Many, many surveys focus on what’s important to employers, and how employers, students, faculty, and alumni feel about graduates’ level of preparation.

These surveys explore a wide variety of skills and personal attributes: some that can be developed in a classroom, some that can be developed through co-curricular experiences, some that can be developed through work experience, and some that are personal attributes of individuals.  Not all of these surveys deserve serious consideration: small samples, collecting opinions from individuals within firms who may or may not be familiar with new hires (CEOs, senior executives, etc.), etc.  But, those that do come to alarming conclusions.

Professional Skills Gaps

The American Association of Colleges and Universities (AAC&U) has conducted a survey of employer perceptions for many years.  Key insights from this study are shown in the figure below – and the differences are gaping.  ‘Oral communications’, ‘adaptability and flexibility’, ‘critical thinking’, ‘complex problem-solving’, and ‘written communications’ show up at the top of the list – flagged as important by employers, and areas where students are not as prepared as they would like.  Utilizing technology, at the other extreme, is still relatively important, but students apparently have those skills in spades!

This study finds there are important age differences in attitudes toward these skill gaps, with employers under 40 placing more emphasis on ‘adaptability and flexibility’ and ‘complex problem-solving’, and employers 50 and older placing more emphasis on ‘oral and written communications’.  This finding provides insight as to where the emphasis on skills will be placed going forward.

An organization that brings together higher education and employers, NACE has developed a set of eight competencies that employers say are important to career success.  ‘Leadership’ shows up as the competency with the biggest preparation gap (32 percentage points), along with ‘professionalism’ (25 percentage points), and ‘communications’ (24 percentage points). 

A study conducted by APLU provides insight on how such professional skills build, from foundation through advanced, and explores opinions across employers, current students, faculty, and alumni.  Aligned with the NACE study, areas such as ‘understand role in the workplace and have realistic career expectations’, ‘recognize and deal constructively with conflict’, and ‘accept and apply critique and direction in the workplace’ show the most significant preparation gaps – and all three would be classified as ‘leadership’ or ‘professionalism’ by NACE. 

Common themes from these three studies are gaps in preparation in advanced skills, especially leadership and professionalism, and a foundational skill, communications.  We strongly believe college curricula and co-curricular activities can help students build these kinds of skills.

Gaps in Disciplinary Knowledge

General skills such as communications and leadership will always gravitate to the top of such surveys because these skills are important in virtually every job.  However, it is essential to note these kinds of surveys do not typically address a critical question: does the student’s major prepare them for the specific work requirements in that major - does a finance student know how to price an option; does an industrial technology student have appropriate CAD/CAM skills...?  Where available, research focused on industry-specific technical or hard skills shows similar preparation gaps.  Getting at career-specific preparation is a different – and equally important – issue.

Personal Attributes and the Skills Gap

The AACU study also does a nice job digging into the ‘mindset’ or ‘disposition’ of students that employers find important. These personal attributes also play a key role in the employability of the student and employer perceptions of preparation.  ‘Drive/work ethic’, ‘motivation and initiative’, ‘resilience and persistence’, and ‘self-awareness’ top the list.  A ‘sense of social justice’, ‘a desire to engage with the local community’, and a ‘worldview that allows people to understand the global implications of actions outside the United States’ drift to the bottom.  (We could see this set of personal attributes being very important for particular jobs.)

This set of mindset/disposition characteristics is personal to the individual student and perhaps harder to influence through the college experience – though it likely shows up in areas such as ‘leadership’ and ‘professionalism’.  That said, there would appear much more opportunity for the college that embraces this list as well and asks the question how these mindsets/dispositions can be cultivated through the college experience, relative to the college that assumes these traits are simply inherent with the student.

Closing Gaps

Some may be inclined to dismiss such feedback from employers: who were the survey respondents thinking about when they completed the questionnaire: the best new hire, the worst new hire, etc.; were respondents in a position to even evaluate students; we are placing students, what’s the problem; …? 

We don’t feel any college can ignore these kinds of findings.  Regardless of how well college graduates have fared in the past or how strong placement rates are currently, if colleges don’t adequately prepare their students for the work world, the work world will aggressively seek out alternatives to a college degree – and some of this is already happening. 

Colleges need to ask how they can close these gaps.  Do colleges, faculty, and students actually know what is important to employers?  How can these disconnects in expectations be addressed through the college’s curricula – and pedagogy?  How can they be addressed through student co-curricular experiences?  What about advising and counseling?

Importantly, how do colleges ensure there is more consistency with respect to career preparation across students?  We have personally worked with scores of students who were exceedingly well prepared when they graduated and went on to fabulous careers.  How does higher education ensure this is the norm and not the exception?  Finally, what is the role of the employer in helping communicate their needs and ensuring expectations are aligned?

Colleges must shorten the step students take from campus to the work world and we will dig more deeply into this issue with our next post.

Research assistance provided by Marley Heritier

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.