America faces a growing problem with vocational education—that is, with the training of workers, particularly those who don’t complete four-year college degrees, in job-related skills. People who leave school at 16 can’t access a clear, well-designed training system as exists in many European countries. And if they are lucky enough to get a job, they don’t have access to continuing education: Whereas you could once be promoted from the shop floor to, eventually, the executive suite, almost all the top jobs now go to people with college degrees. The result is a frustrating mess. More than 50 million Americans are stuck in low-wage jobs without much prospect of acquiring the skills that they need to climb out of poverty; at the same time, three-quarters of employers say that they can’t hire people with the requisite skills. This is the equivalent of “the last mile” hurdle in supply chains where getting goods over the last mile of the journey is the most perilous and costly part of the whole undertaking.

At first glance, America retains a wide lead when it comes to top talent. Fourteen of the world’s 20 top universities as measured by research output are located in the United States. More than half of U.S. billion-dollar startups were founded by people who were born abroad. Look more closely, however, and that lead is less solid. China is on track to produce twice as many Ph.D.s in STEM subjects as the U.S. by 2025. America’s best universities are in danger of becoming finishing schools for the already privileged rather than efficient capacity-catching machines: Harvard, for example, has more students from the richest 10% of the population than it does from the bottom 90%. Only about 20% of undergraduate places are awarded on the basis of pure intellectual merit (the others are awarded on a preferential basis to athletes and children of alumni and big donors); the U.S. Supreme Court has just agreed to take up a case examining whether the university’s admissions policies discriminate against talented Asians. Similar problems can be found across the Ivy League.

At the same time, the tradition of relying on foreign talent might turn out to be a bear trap. A growing proportion of foreign-born Ph.D.s now return to their native countries either to teach or, more frequently, to start their own companies. From 1978 to 2007, only 25% of the 1.2 million Chinese who went abroad to study returned; from 2007 to 2017, that proportion had risen to 80%.

America’s hold over top talent is under threat at a time when top talent is growing ever more important. Silicon Valley has famously applied the “10X” rule to programmers: The best programmers are 10 times more productive than the merely average programmers. Now, with the advance of technology, the “10X” rule is turning into the “100X rule.” Marc Andreessen, the venture capitalist and founder of Netscape, claims that “the gap between what a highly productive person can do and what an average person can do is getting bigger and bigger. Five great programmers can completely outperform 1,000 mediocre programmers.”

How Do You Fix A Talent Shortage?
The most obvious way for companies to address the crisis is to raise their wages or improve their working conditions. Apple Inc. recently surprised some of its engineers with unscheduled bonuses ranging from $50,000 to $180,000, presumably to prevent them from jumping ship to talent-hungry Meta Platforms Inc. Intel Corp. is moving to a “hybrid first” work model in order to attract and retain employees. Inc. and Walmart Inc. are covering college tuition costs for some of their employees. That option is plainly available more to fat incumbents than to scrawny startups.

Boris Groysberg of Harvard Business School suggests some more subtle techniques that companies can use to find talent. They can look more closely at underrepresented groups such as women, ethnic minorities and people who live in out-of-the-way places. They can make more use of freelancers and part-time workers. They can rehire former workers who have moved on (“boomerangs”). They can recruit top graduates from state schools rather than scrambling over middle-ranking candidates from Ivy League schools: Domino’s Pizza Inc. is hiring recent tech graduates from Michigan State University and Wayne State University to improve its technological capabilities. Companies can cut down on labor by installing automatic checkouts or redesigning work processes. 

Groysberg points out that companies sabotage themselves by screening out potential recruits. The automated recruitment systems that most companies now use routinely reject candidates for formulaic reasons—for example, because they have committed a minor offense in the past or because they don’t have exactly the right qualifications. They could be reset. Many companies unthinkingly demand a college education as a condition for employment despite the fact that more than 60% of the population doesn’t have a degree, and that many degrees don’t have any relevance to the job. Companies can “shift the supply curve dramatically,” Groysberg says, if they simply “get rid of this filter.” 

Still, even the most enlightened companies can only do so much unless America addresses the structural problems that underlie the shortages. America needs to start thinking about “talent” differently, not as a problem that can be solved but as a supply chain that needs to be sustained. Just as car companies think in terms of years when planning their supply of car parts rather than rely on the spot market, so America needs to think in terms of decades when considering its supply of people. Companies also need to take a more constructive interest in public policy. Rather than trying to buy their way out of the crisis with higher wages, they will have to band together to address the systemic problem. Overcoming supply-chain disruptions will involve taking on both the Republican right and the Democratic left. It will also require reexamining some of the most ingrained assumptions of the broader American political tradition.

Expanding The Workforce
America’s problem with its labor force participation rate starts with its failure to raise the retirement age. The average American can still retire at 65 despite the 19.5 years of life ahead of them, compared with 13.7 years after the retirement system was introduced in the 1930s. Swedes and Brits by contrast have to wait until they are 70.