Higher Education and the Labour Market Skills Mismatch

Employability by Paresh Soni Associate Director: MANCOSA Graduate School of Business

In his State of the Nation Address, President Ramaphosa stressed the importance of reducing the unemployment rate, especially amongst the youth in South Africa. According to Trading Economics, the youth unemployment rate in South Africa decreased to 52.20 percent in the third quarter of 2017 from 55.90 percent in the second quarter of 2017.

In the coming months South African higher education institutions will churn out thousands of graduates. However, once the celebrations are over, a large proportion will experience unwarranted grief when they realise that there is a mismatch between their newly acquired skills and labour market needs. Statistical charts will once again indicate a further rise in unemployment.

Economists are of the opinion that the mismatch between skills and labour market needs is a global phenomenon and has become not only a significant contributor to the youth unemployment crisis, but also an important marker of an ineffective higher education system unable to meet the economy’s needs.

This distortion, manifested as discrepancy between supply and demand for labour, ultimately results in decreasing relevance of labour and the economy faces the problem of inefficient utilisation of its fundamental resource–human capital. Such a situation disrupts trends in overall economic growth.
It is a paradox of our time and in this respect, South Africa is no exception. On the one hand, unemployment is very high, and on the other hand, companies can’t find the talent and skills that they need. This is the great mismatch. It is a serious impediment on South Africa’s economy, especially given that on the one hand a lot of money is spent in higher education and on the other hand, the private sector cannot get the employees they need to create growth, impacting on competitiveness and productivity.

This mismatch is normally represented as simply not having enough highly educated people with appropriate skills. Labour markets, specifically in the new digital era complain that fresh graduates do not have the right skills to handle the available jobs. This situation engenders a new risk of education and business increasingly developing in two separate worlds. In most instances, graduate have a sufficient level of education, but not in the fields that companies are looking for.

What then are the basic manifestations and characteristics of such a Skills Mismatch?Economies are trying to grow and employers are out there looking to recruit, but there is a plethora of young people who just do not fit with what the labour market needs. Even sought-after graduates, such as engineers, need additional skills to satisfy employers. As a result the number of graduates is growing, and simultaneously the Skills Mismatch is also rising. A degree is no longer a guarantee of a good job, and fingers are being pointed at universities for failing to better prepare students for the real world and the expectations of employers. Universities are often seen as the problem, adopting an ‘Ivory Tower’ approach to learning.

In the past a university degree was a strong indicator that a candidate will succeed in an entry-level job. Unfortunately, universities are failing to prepare students for the workforce, which is forcing corporations to change their hiring practices. As there are fewer certainties about what career a degree will lead to, employers want graduates to be better prepared for the workplace. In this respect, universities need to be thinking about the skills students will need to do well in a job.

According to the Economist, 70 per cent of employers indicate insufficient training at the educational institutions, while 70 per cent of the educational institutions feel that they prepare their graduates adequately for the labour market. The challenge here is to ensure that education has a greater focus on general problem-solving skills rather than specific knowledge, something that can be achieved through better communication and collaboration between educational institutions and the labour market.

A global survey also shows that 40 per cent of employers find it difficult to fill starting positions because the applicants have insufficient skills. About 45 per cent of employed youths indicate that their jobs are unrelated to their field of study. By 2020, there will be a global deficit of 40 million people with tertiary education, and developing countries will have a deficit of 45 million people with secondary education, particularly vocational training; while in the developed economies, there will be 95 million people lacking the necessary skills to be employable.

The implications for the higher education sector are clear–they need to create graduates who are more agile, have a solid understanding of how the workplace works and can see how their skills fit into it and prepare them for the idea of moving across jobs and sectors. The way employability is currently measured puts too much emphasis on universities’ ability to get graduates into employment that matches their degree discipline, rather than on their readiness for a career. A better interpretation of graduate career paths and the sharing of knowledge between universities and businesses would leave the higher education sector better placed to tackle the issue where it can.

In the long run it is imperative that the responsibility for filling this gap in knowledge must be shared between businesses and universities, with awareness on both sides of the complexities of the other. Employers are not seeking changes in higher education provision that would risk losing specialist knowledge. But they want educators to pay more attention to research showing which skills are needed by different sectors, and to respond quickly to it.

For the near future universities will have to support students with the skills they will need for the new world of work, such as a more complex set of graduate attributes which can engender critical and creative thinking skills, global awareness and digital literacy. The new graduates will have to be resilient, adaptable and able to work in teams as they form and reform. Education will have to be continuous and lifelong. They need to have local and international networks be entrepreneurial, especially aware of the world and what is happening.

The roles for which the universities had been preparing students in the past are thinning out, and few are able to rely on having a ‘job for life’ in a secure profession or corporation. The new workers need to be flexible, work on demand, and bring skills to bear as and when they are required. Portfolio careers will no longer be the exception. Digital skills and entrepreneurial abilities will be necessary for success. Students will have to be supported with the skills they will need for the new world of work, specifically in critical and creative thinking skills, global awareness and digital literacy.

Finally in order to succeed in today’s global economy and to prepare a student after graduation, universities must improve on communication skills, critical thinking and analytical reasoning skills, application of knowledge and skills in real-world settings, complex problem solving and analysis, ethical decision-making and teamwork, among others. Employers also agree that higher educational institutions should be doing more to provide a learning environment and skills relevant to the workplace.

Paresh Soni – Associate Director – Mancosa [GSB]