Updated: November 11, 2024
Talent shortage definition and meaning
A talent shortage occurs when there aren’t enough qualified candidates to fill certain positions at a company because they lack the required skill set, often leading to a situation where the demand for these skills exceeds the available supply.
How a talent shortage can affect employers
Talent shortages are more common in some industries than others, with health care, education, information technology, consumer goods and services, transportation, and communication services frequently topping the list. This talent gap may continue to grow in the future.
According to a report by Korn Ferry, “more than 85 million jobs could go unfilled [globally] because there aren’t enough skilled people to take them.” If not addressed, this could result in unrealized annual revenues of $8.5 trillion by 2030. Notably, the United States may face a shortage of over six million workers by 2030.
The takeaway is that a lack of available talent can sometimes pose a significant challenge for employers that have open roles requiring highly skilled candidates. This may result in:
- A lack of growth and innovation for the company
- A decrease in the company’s competitiveness
- Current employees taking on more work to compensate for the staff shortage
- Existing employees becoming overworked, stressed, and burnt out
- A decline in employee morale leading to Increased turnover rates
- Reduced profitability for the company
A talent shortage can occur in any industry. However, studies have found that the education and health services sector, along with the professional and business services sector, tend to consistently have the highest number of open positions.
What causes talent shortages
There’s a number of reasons why some employers are facing challenges when filling certain roles.
Global pandemics
The talent shortage in the US has been rising for over a decade. One of the most notable culprits in recent years has been the COVID-19 pandemic, which caused massive disruptions in the US workforce, resulting in the Great Resignation, which began in 2021 and peaked in 2022. Although quit rates have decreased since then, they remain high, and hiring rates are struggling to keep up.
Skills gap
A skills gap refers to the difference between the skills needed to perform a job and the skills an employee actually possesses. This disparity creates a talent shortage for the employer because these staffers lack the necessary skills and expertise to carry out their responsibilities. In a 2024 survey by Springboard for Business, 70% of leaders said there is a skills gap at their company and that it’s negatively affecting business performance.
In addition:
- Data analysis and project management are the most in-demand technical skills.
- Cognitive skills are the most in-demand soft skills.
- Forty percent of leaders say skills gaps are worsening.
- Difficulty finding qualified people is the top challenge employers face due to skills gaps.
Other factors that may cause talent shortages include:
- Technological advancements, which increase the need for workers with tech-savvy skills.
- The rapid shift toward more flexible work, such as remote and project-based work, which may require skills that the current talent pool lacks.
- Industry expansion, causing the demand for skilled workers to outpace the supply.
- An uneven distribution of talent geographically. Some locations may have an oversupply of some skills, while others fall short.
- Demographic changes can lead to experienced worker shortages, as older workers retire and younger people entering the workforce lack the expertise to fill these roles.
- Increased globalization, causing more people to relocate in favor of higher pay and greater career advancement opportunities, thereby resulting in talent shortages.
Tips for overcoming talent shortages
In the Springboard survey, 63% of leaders ranked “helping employees build more skills for their current job (upskilling)” as their top priority for addressing the skills gap in the next year.
Employers can take these additional steps to overcome talent gaps (which can be a “win-win” for both parties):
- Reskilling: The employee learns new skills to prepare them for a different position within the company.
- Updating your hiring strategies: In times of talent scarcity, adhering to traditional hiring methods may not be the most prudent approach. Considering skills-based hiring and adopting a flexible work model can expose you to a larger pool of potential employees. Moreover, partnering with a staffing agency can be a strategic move to fill talent gaps.
- Adopting a diverse and inclusive workplace: A diverse workforce consisting of people of different genders, ages, ethnic backgrounds, and so forth can fuel a variety of perspectives that spur innovation and growth.
- Partnering with educational institutions and local employment programs: By collaborating with these entities, employers can help ensure students receive the necessary industry-specific knowledge and skills upon graduation. Employers can then tap into this pool of trained graduates.
- Providing competitive salaries and benefits: This is one of the most effective ways to attract and retain highly skilled workers.
Lastly, leaders should support continuous learning by allocating resources and granting employees time to engage in job-specific learning activities. Leaders themselves should set an example by participating in continuous learning to improve their leadership skills.
Using talent shortage in a sentence
“Because the job market is always changing, we have implemented preventative measures to combat talent shortages, including blended workforce options.”
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