News and Trends

More Startups Are Cashing in on the Growing Worker Skills Gap

While the U.S. employment picture improved with September's jobs report showing 248,000 new positions, and a jobless rate of 5.9 percent, a deeper look reveals a growing divide between prospering American workers and those falling further behind.

The labor participation rate is at 62.7 percent—the lowest in more than three decades—and hourly wages were mostly flat at $24.53. Some economy experts argue the skills gap between what employers are looking for and what job seekers bring to the table is pushing the participation rate lower.

Now with cloud-based computing and technology proliferating, more start-ups are creating digital education tools including online videos, designed to help narrow the skills gap. The new tools can include short online videos users can access remotely. The abbreviated videos and tools are part of a larger education trend, sometimes called abbreviated or micro learning.

Research from McKinsey Global Institute suggests there will be a shortage of 16 million and 18 million high-skill workers among advanced economies by 2020. High-skill workers are those with college degrees or higher. 

The skills gap largely is driving wage stagnation, says Pam Villarreal, economic policy expert at the National Center for Policy Analysis in Dallas. "If there was a demand for certain types of skills, wages would go up to attract those employees to firms," Villarreal says.

And while a few, quick online course can't replace a college degree, users and employers say new tools can swiftly fill a need. 

Think and learn fast

Among the start-ups hoping to cash in on the skills gap is Grovo. The New York-based start-up has raised $7 million in funding from Accel Partners, and offers 60- to -90-second training videos.

Under its proprietary learning methodology, Grovo boasts more than 4,500 video lessons on Internet tools, cloud-computing services and other related topics. Grovo co-founder and CEO Jeff Fernandez said the video's quick time frame helps users retain more information. "Retention is at an all-time low due to the amount of information we have in our lives," he says.

The company has trained more than 3 million users since 2010. Fernandez declined to offer the number of businesses that are clients.
Grovo costs companies $199 a year, per worker, including unlimited access to the education platform and analytics reporting.

Michael Oppler, vice president of career development at New Jersey's Prominent Properties Sotheby's International Realty, said his company has used Grovo for two years for half of its 450 employees.
"It's like an encyclopedia—when you want to know one fact or tool, you can get it from Grovo in a minute or so, instead of doing a bulky webinar," Oppler said.

Udacity, based in Mountain View, California, is another start-up in the online education platform.

Udacity recently raised $35 million for its program that teaches skills in a condensed amount of time, in a field of expertise. Total funding is at $58 million, and courses straddle topics including computer sciences, web development and mobile.

While online classes are free, $199 a month gives students access to coaching networks. Udacity has 3 million enrolled students globally.
"People want to work, but can't because they lack the skills," said Udacity CEO Sebastian Thrun in an email to CNBC. "By going directly to companies and their employees, we can go around all the red tape that conventional universities and accreditation agencies have developed."

Hype or real deal?

There are skeptics, of course. How much can you really learn by watching a one-minute video?

"There are very few skills you can acquire in 60 seconds, or even six hours, that will make you fabulously more employable," said Mark Mills, senior fellow at New York's Manhattan Institute for Policy Research. "People are smart enough to know that—but you do get an increased familiarity [with topics] when you are doing some homework first."

Others argue new micro learning tools can offer affordable, plug-and-play training options for employers.

"It's a valuable approach, and can meet employer needs quicker and for students, it can help to give them a sense of momentum with milestones or sub-credentials" or smaller credentials, said Maria Flynn, senior vice president of the Building Economic Opportunity Group from Jobs for the Future, a Boston-based nonprofit.


More from CNBC