Strategies for Building a More Inclusive Labor Market
New study finds upskilling the current workforce is one of the top five most impactful investments for nearly 25% of companies
March 14, 2022
Middle-market companies are taking proactive steps to bridge labor mismatches, a key factor in America’s challenging labor landscape in which there are more open jobs than job seekers. Perhaps more importantly, these proactive steps, e.g. removing barriers to entry, closing skills gaps, and expanding talent pipelines, have the dual effect of creating a more inclusive labor market.
Varied efforts to address labor mismatches arrive at a time of great instability in America’s workforce. Though the unemployment rate has steadily decreased in recent months – a promising sign – the number of job openings continues to outpace the number of unemployed, an illustration of the country’s volatile work ecosystem.
At the end of December 2021, there were 10.9 million job openings compared with 6.8 million people who were out of a job at the same time, according to Bureau of Labor Statistics data. That gap of nearly 4 million open jobs – is a complete inverse from the year prior, when there were slightly more than 4 million more unemployed than there were jobs.
Looking at the labor situation another way, the ratio of unemployed people per job opening was 0.6 last December. That’s down from 1.6 a year prior – and even less than in April 2020, the early days of the pandemic, when there were five unemployed people per job opening.
The current volatility in America’s work environment can be at least partially attributed to the impact of the COVID-19 pandemic and how it shifted the balance of power in favor of workers.
Middle market companies are responsible for one third of private sector GDP and job creation. A recent survey of middle market companies with annual revenue of $20 to $500 million found leaders are enacting various forward-looking measures to expand their talent pools to address the current worker shortage.
"Investing in upskilling workers and expanding talent pipelines are essential strategies for addressing wealth inequality and driving socioeconomic mobility," says Naomi Smouha, Sr. Manager of Community Impact and Investment at Capital One.
According to the Capital One Middle Market Survey:
- Many middle market companies are actively working to expand talent pipelines
- For example, nearly half (47%) are partnering with nonprofits and community workforce development programs to support hiring diverse talent. 39% are adopting apprenticeship or skills-based training models.
- Considerable shares of companies are addressing barriers to entry in employment
- 41% are increasing flexibility for working parents and caregivers, and 35% are ensuring diverse interviewers.
- Many companies see the long-term benefits of focusing on skills gaps
- Upskilling the current workforce made the top five most impactful investments over the coming months and years for nearly 25% of companies.
Addressing labor mismatches through expanding talent pipelines
One of the many factors driving the current labor shortage can be explained by what the national nonprofit Opportunity@Work has called “labor mismatches” – or the discrepancies between the skills employers need and the skills employees offer. Factors leading to these skills gaps include: inadequate resources connecting companies with candidates, the way candidates are filtered through the application process, and the way current employees’ skills are further developed.
“Companies that value the skills workers gain through work experience, who are able to capitalize on those skills by creating pathways to mobility in their own companies through internships, apprenticeships and other on-the-job learning opportunities, will succeed in surfacing a pool of 70 million workers skilled through alternative routes (STARs) instead of a bachelor’s degree, more than half of whom are positioned for higher wage work if given the opportunity and access to those jobs,” shared Papia Debroy, Senior Vice President, Insights at Opportunity@Work.
Many of the surveyed middle market companies have also taken action to expand pipelines, a key initial way to bridge skills gaps. Among surveyed companies, commonly cited efforts to broaden pipelines include:
- Partnering with nonprofits and community workforce development programs (47%)
- Collaborating with vocational schools and third-party providers (46%)
- Adopting apprenticeship or skills-based training models (43%)
- Collaborating with traditional educational institutions (39%)
Dismantling barriers to entry a key priority for middle market employers
In addition to expanding talent pipelines, middle market companies have changed parts of their own businesses to break down barriers to entry in employment amid a broadening movement to improve equity in the workplace.
Increasing flexibility for working parents and caregivers (41%) was the most commonly cited effort to address barriers. Slightly smaller shares said they are expanding remote work options (36%), ensuring diverse interviewers (35%) and establishing programs to make roles more accessible for individuals with disabilities (34%).
In addition, about one-third of companies said they are removing bias in screening and testing requirements (33%), such as offering multilingual applications and testing (33%) and conducting bias training for interviewees (32%). One quarter say they are removing 4-year degree requirements, while about one-in-five (19%) are masking names on applications to remove barriers to entry.
Beyond attracting more diverse talent pools, the middle market is also addressing internal skills gaps by fostering skill development and well-being for current employees. Nearly two-thirds (64%) of companies are investing in continuous learning, development and/or upskilling training programs, while about half (52%) are investing in apprenticeships, internships, mentorships, and other guided programs. Meanwhile, 39% are investing in rotational programs that encourage mobility and cross-training. One third are investing in skills-based volunteerism programs.
An overwhelming majority (91%) of the middle market leaders surveyed said their company is already implementing technologies to allow employees to work more efficiently in a remote or hybrid environment. This move toward remote work was cited by majorities across all demographic groups.
Even while addressing current workforce issues, companies are investing in the future
The middle market already sees the long-term benefit of investing in both building incoming talent pools and increasing investments in employee experience and wellness.
According to the Capital One Middle Market Survey, about one-in-five companies see building a talent pipeline through nonprofit or community programs as one of the top five investments with the greatest impact on business over the the next one to three years (21%). Smaller but considerable minorities anticipate such investment as having among the greatest return on investment (ROI) in the coming months (19%) and years (18%).
For roughly one third of companies, investing in employee experience and wellness was anticipated as being among the top five most impactful investments for the next one to three years (32%). Similar shares expect considerable ROI over the same time period.
Upskilling the current workforce made the top five most impactful investments over the same period of time for roughly one quarter of companies. Similar shares see investing in upskilling as being among the top investments with the largest ROI in the coming months (32%) and years (28%).
Seismic shifts in labor will continue to be a long-term challenge throughout this decade. Middle market companies are laying the foundation for a path to stability and long-term growth through proactive measures – addressing labor mismatches, dismantling barriers to entry, and investing in the work-life balance of existing and potential employees – to meet current demand and demand yet to come.
Furthermore, policies are being made such as the Pay Transparency Law where employers will be required to share salary details with applicants in job postings. For New York City, this law will go into effect May 15th with the aim of giving workers, particularly women and non-white job seekers more agency in salary negotiations.
Through these progressive practices, middle market employers are increasing their efforts to realize the potential of America’s “hidden” talent pool. In broadening access to higher wage work for a more diverse population of workers, employers are better equipped to address critical hiring needs, while simultaneously helping to build a more inclusive labor market.
The Capital One survey was conducted by Morning Consult among 400 U.S. middle market financial decision-makers representing companies with total annual revenues of $20 million to $500 million. The survey was conducted from an online panel from September 1 – September 9, 2021. The margin of error is +/-5%.
About the Capital One Insights Center
The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology.
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