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Supply vs. Demand: The Economics of the Tech Talent Shortage

The scarcity of software developers has made it more difficult than ever to find engineering expertise. We examine the facts and causes of IT talent shortages in the United States, as well as how international hiring might assist organizations in navigating a competitive domestic market.


The scarcity of software developers has made it more difficult than ever to find engineering expertise. We examine the facts and causes of IT talent shortages in the United States, as well as how international hiring might assist organizations in navigating a competitive domestic market.

According to the most recent US workforce statistics, there will be 1.4 million unfilled CS jobs by the end of 2020. Meanwhile, just 400K graduates are produced each year. If the country’s software developer shortfall continues to expand at its current rate, the government will face an unrealized output of $162 billion. Without new talent, business development and digital transformation are difficult, widening the gap between supply and demand for tech skills.

State of the Global Talent Shortage in 2022

By 2022, the global skills shortfall will have reached 40 million skilled workers. The worldwide skills shortfall is expected to reach 85.2 million workers by 2030. Companies throughout the world are at risk of losing $8.4 trillion in revenue due to a shortage of competent workers.

The key reason for this is that, nowadays, the software supports 90% of all operations at almost every normal firm, so there is a shortage of tech experts able to provide excellent services. The main factors affecting the growing global skills shortage are the global market and technology advancements. According to a recent survey, 87 percent of businesses are either experiencing or anticipating to experience a skills shortage in the next few years.’

By 2022, there will be a shortage of 70K IT or digital-related skills in Sweden alone. Meanwhile, Israel has a 15% software developer deficit while being one of the top three fastest-growing digital startup nations in the world. The most probable industries to be affected by the skills gap and IT talent shortage include data analytics, IT, mobile, and/or web design.

There are currently just 65 potential workers for every 100 employment openings. When compared to pre-pandemic years, when there were about 85 unemployed candidates for every 100 job openings, this figure is far too low. Every year, however, the number of persons applying for jobs declines.

Regardless of industry, today’s skills scarcity has made it difficult to locate talented labor. According to a McKinsey & Company survey, over 44% of well-known organizations predict a significant talent gap in the next five years. Unfortunately, 87 percent of these businesses are already feeling the effects of the scarcity and fear that the worst is yet to come.

The United States Talent Shortage Statistics

According to ManpowerGroup’s US skills shortage figures, 69 percent of US companies struggled to fill positions in 2020. Tech jobs are among the top ten most difficult to fill.

The pandemic’s global issue has had an impact on the American tech market. It accelerates the country’s digitization processes while simultaneously widening the tech talent divide. The IT talent gap continues to rise as machine learning technologies advance, and 92 percent of organizations expand their cloud workloads.

The IT industry in the United States has the greatest attrition rate of any industry, at 13.2 percent. It’s one of the primary impediments to the growth of the US tech market. Furthermore, high turnover is expensive for companies since they are compelled to pay 50–250 percent of the income for replacement.

According to the Bureau of Labor Statistics, the scarcity of engineers in the United States will reach 1.2 million by 2026, while 545K software developers will have left the market by then.

The severe developer shortage has resulted in a rise in software developer pay, transforming IT into the highest-paid industry.

Between 2022 and 2030, the need for software developers, including software engineers, is expected to increase by 22%, according to the US Bureau of Labor Statistics. This figure is over 4% higher than the average career growth rate.

In addition, there will be roughly 189,200 job opportunities for software engineers every year in the next ten years. As a result, there’s no denying that the need for software engineers is skyrocketing.

Shifting Hiring Trends

As high-quality, local developers become increasingly scarce, companies are beginning to examine innovative approaches to hiring. Employers used to conduct technical interviews with university graduates in the past.

Businesses are beginning to accept candidates who have pursued more unorthodox pathways since there is a scarcity of professionally educated graduates. After all, why should they be bothered about their academic credentials if they can exhibit that they are more than capable of doing the job?

As a result, people who re-skilled while working in other professions or attended a programming boot camp are now being evaluated for software engineering roles. Is this going to help developers bridge the gap? Certainly not straight away. There will always be more work than developers, and it will take time for them to learn their subject and how to “perform the job” in the real world.

The sector will most certainly benefit from an influx of junior developers, who will naturally mature over the next few years. While it may be a brief reprieve, nearshoring is expected to become the norm in the near future as development costs continue to rise inexorably.

Causes of Software Engineer Shortage

A Higher Demand for Innovation Software

Even small businesses now require websites and applications to facilitate operations and consumer interactions. Even health insurance firms require software to manage enrollments and maintain all customer policies digitally.

Furthermore, the operation of many products on the market necessitates the use of specific software. As a result of the growing need for mobile-friendly apps and websites, software engineers are in high demand.

The limited life of Software Code

Companies are required to update their software on a regular basis due to the ongoing change in code. A code typically has a life of only a few years, and firms need the help of software developers to get a new one for a much-needed technological shift.

Advancements in Technology

While the epidemic may have prompted corporations to postpone investment plans for a while, they are now gradually reallocating their technology spending, resulting in an increase in demand for software engineers in the United States and around the world.

In addition, many venture capitalists are looking to invest in companies as a result of supply chain disruptions. Different firms have been convinced to hire more and more software developers as a result of this move.

Weak CS Education

Education is the most important factor that can assist solve the skill shortage problem. At the same time, education is the country’s biggest challenge as well. Few students are eager to seek tech employment, as only 13.2% of schools offer AP computer, science classes. Seventy-seven percent of employment in the next ten years will demand tech abilities, and educators are already aware of this. More than 88 percent of teachers believe that computer science is essential for students’ future success.

Currently, two out of every ten professors admit that their pupils do not receive any computer science instruction. The lack of supportive educational programs and insufficient budget are the main causes of poor CS education in primary schools.

Over the top Employer Expectations

Employers prefer to recruit experienced software engineers, but this desire frequently results in overly stringent candidate standards. AI, machine learning, and data science are rapidly evolving technologies, but they are still in their early stages of development. As a result, finding experts with sufficient qualifications in the US software development job market is nearly hard.

Inexperienced in In-Service Training

Companies provide insufficient upgrade training, which motivates employees to seek professional development from outside sources. Dissatisfied personnel frequently decide to change their growth area, putting organizations in danger of losing tech expertise not only on a corporate level but also in terms of the broader tech workforce.

Weak Areas in the Software Industry

Mismatch of Skills between Academia and Industry

Unfortunately, many university computer science schools fail to tailor their curricula to industry needs. They fail to prepare students for the real world by not making an attempt to assist them in comprehending the actual application of software engineering. Rather, most computer science departments concentrate on the theoretical parts of their disciplines and neglect to teach their students the necessary skills.

Many departments also opt to teach Scheme instead of other programming languages that fulfill industry standards. Furthermore, students are frequently not taught in a practical manner with exercises and examples that will prepare them for employment in the software business after graduation.

Underdeveloped Tech Apprenticeship/Internships

Unfortunately, apprenticeships in the technology industry are not encouraged by the American educational system. People who wish to work in software engineering but are concerned about not getting enough experience before securing a job are discouraged by the lack of training.

Internships are available at some companies. However, they are almost always unpaid. Given that software engineering is a technical sector, a competitive starting salary is a key draw. Many people may fail to perform well in a section of their jobs if they do not have it since apprenticeships and low-tech experience do not exist. As a result, before getting a dream job, paid internships are essential for gaining the necessary skills and knowledge in software engineering.

Unreliable Quality of Coding Bootcamps

While coding boot camps appear to be an excellent way to break into the technology industry, they frequently fail to provide adequate support for prospective students. Not all coding boot camps provide prospective software engineers with a high-quality education. Many of them provide attendees with minimal skills and expertise while charging exorbitant fees.

Because of inconsistencies in the quality of coding boot camps, only a few people are able to fully comprehend coding. The rest are more likely to have a theoretical or unguided experience, leaving them without the skills they came for in the first place. Unfortunately, a lack of quality in coding boot camps leads to a wider educational gap and a greater software engineer shortage.

That being said, a coding bootcamp is an excellent way to learn how to become a software developer. You just have to choose the program that is the most suitable for your needs.

The Impact of the shortage of software engineers

The shortage of specialized software engineers has a variety of consequences for enterprises. To begin with, the scarcity of software developers has operational consequences that affect hiring budgets and deadlines. According to a survey, hiring talent for tech professions takes 50 percent longer than hiring talent for other sectors. According to the survey, it takes an average of 66 days to locate a suitable person to fill a technical position.

Moreover, a scarcity of software developers is stifling innovation and limiting business expansion. According to a research, over half of CIOs have said that a shortage of skills has made it difficult for their organizations to stay up with the latest technologies in the last five years. Furthermore, 60% of CIOs said that a skills shortage made it difficult for their organizations to stay up with their competition.

Companies may find themselves in a holding pattern while looking for the “ideal” developer, which can have a negative influence on the firm. A lengthy hiring procedure can throw plans off, obstruct software rollouts and updates, and reduce customer satisfaction. All of this has an impact on companies.

It’s one of the reasons why 74% of organizations that started updating their legacy IT systems never finished them, and seven out of ten companies fail to fulfill their goals. A lack of internal expertise and knowledge can put core company functions in danger, lead to a loss of trust, and accelerate turnover in other departments due to frustration, in addition to blown timelines and cost overruns.

Hiring Challenges Faced Employers

According to a recent poll conducted by Westmonroe in the United States, 77 percent of CEOs confront several problems when it comes to hiring due to the scarcity of programmers. Furthermore, these issues are common across the board.

Let’s look at five obstacles that business leaders are likely to avoid when hiring a team or solo software developer to lead their innovation projects.

Costs of Recruitment

Many business owners waste up to 40% of their time on operations that offer little value to their company, such as recruitment. Furthermore, filling a job vacancy within 42 days might cost a company up to $4,129. Even if you’re dealing with seasonal demand, this time range is insufficient. In other words, the type of commitment businesses make in the middle of the ongoing software developer talent scarcity can be overwhelming, especially if the ROI isn’t outstanding, even after a candidate has been onboarded.

Limited Availability of Software Specialists

Every IT-based company knows that filling vacancies is tough due to a scarcity of qualified candidates in the market. Even if you identify a suitable applicant, they may lack the requisite skill set to meet your company’s needs, objectives, and vision. Remember that the growing number of graduates in the sector does not alleviate the skills shortage problem.

Higher Salary Demands

The US Bureau of Labor Statistics predicted nearly 1.4 million additional software development jobs in 2020. However, in the same year, we only had 400,000 new IT graduates who could fill the vacancies. This wide gap elaborates why the existing software developers and engineers will continue demanding higher salaries.

However, the amount of salary that a business can offer on a software development job depends on the talent’s level of expertise, location, and tech stack. Nevertheless, keep in mind that retaining a full-time developer will cost you more than a remote specialist.

Strict Hiring Competition

Did you know that 75% of potential candidates that HR managers encounter don’t bother to give that extra push when negotiating employment offers? The majority of these candidates are already offered multiple jobs, with added benefits such as better salaries, working environment, and general compensation schedules, just to name a few.

This is particularly true in the software development business. Outside, every company, big or little, is looking for the perfect software engineer. That means you’ll need to improve your perks if you want to attract the best candidates to your job board and keep them after they’ve been onboarded.

Ukraine – The Tech Hub of Eastern Europe

In comparison to the United States, Ukraine is experiencing exceptional growth in its tech workforce. There are already 200K software developers on the market, with 36K new tech graduates added each year. You can locate software experts who specialize in common technologies (Java, JavaScript, C#, PHP, etc.) or add a rarer stack (Ruby, Go, Scala, C, etc.) to your projects using the Ukrainian tech talent pool.

The programming job market in Ukraine is quickly expanding—the outsourcing market grew by 20% in 2017 and is predicted to reach $8 billion by 2025.

Ukraine boasts:
  • 4000 tech firms
  • International firms/MNCs having 110+ R&D centers.
  • Every year, over a thousand events for IT professionals, investors, and startups are held.

A large pool of technical expertise, a convenient location, and a good business climate all entice multinational business owners to establish development teams in Ukraine. Offshore collaboration necessitates meticulous preparation and study.

The Great Resignation

According to the Bureau of Labor Statistics, about 4 million people left their jobs in July of last year. In addition, the month of April saw a surge in resignations, resulting in 10.9 million job openings in July. These startling figures paint a disturbing and alarming picture of a trend that will continue in 2022.

In the tech business, resignations are also at an all-time high. They grew by 4.5 percent in comparison to 2020, according to the US Bureau of Labor Statistics. One of the main reasons for this is that tech-related occupations necessitate a lot of work experience, which leads to burnout and excessive workloads.

More people plan to quit from their employment in 2022, according to some expert projections. According to them, about 23% of Americans may leave their existing jobs and look for new ones in 2022.

This tendency is likely to persist for a variety of reasons. Here are a few examples:

  • People have had enough time since the outbreak to reconsider their job choices and assess their long-term aspirations in light of their present work/life balance.
  • One of the most common reasons for leaving a job is discontent with low compensation, a lack of work-life balance, and poor treatment by employers.
  • Women are frequently compelled to make rash decisions and retire from their careers due to a shortage of caregiving services.

Leaders must act now to lessen the impact of the extreme resignation period, which will last until 2022. One of the key concerns for retaining employees will be to create a welcoming and amicable work atmosphere. Furthermore, startups should strive to provide competitive compensation and benefits to employees, as well as ensure that each employee’s demands are met to the best of their ability.

Why is there a shortage of tech workers?

The pandemic caused due to COVID-19 generated a huge labor shortage in the United States, which some have dubbed “The Great Resignation.” In 2021, almost 47 million people will have left their employment, many in quest of better work-life balance and flexibility, higher pay, and strong business culture.

But surprisingly, the tech shortage is not a new stress factor added to the industry. In fact, according to surveys, CEOs have been expressing their fear of tech talent shortage for over 10 years ago. But yes, by 2019 the fears came true and 79% of people were also worried about the issue of finding and hiring tech talent.

In the United States, two-thirds of IT professionals are thinking about quitting their jobs by 2023. Approximately 40% of them believe that restricted prospects for advancement play a role. Non-flexible work hours, a lack of remote working possibilities, feeling underappreciated, and a poisonous work atmosphere are all prevalent factors. A staggering 85 percent stated their organization was more concerned with acquiring fresh talent than with investing in existing employees. Perhaps unsurprisingly, 58 percent of respondents stated they were burned out.


Q1. Why is there a talent shortage?

The talent deficit in America has reached unparalleled proportions. Employers are feeling the pinch, which has been exacerbated by the Covid-19 outbreak and an elderly population. There were more than 10.5 million job opportunities in the United States in November, up from 3.8 million a decade ago.

Q2. How do you fix a talent shortage?

Here are five strategies that help companies with the recruitment process:

  • The first option should be looking for talent in-house
  • Adjust your hiring criteria.
  • Use of interim professionals.
  • Reduce the time to hire.
  • Transfers.

Q3. What strategies are available to the company when it has a shortage of employees?

The most essential and helpful strategy to help you with employee short is training existing employees.

Q4. Which strategies help resolve the shortage of workers and skills in the organizations?

Here are five ways to solve an employee shortage in a company:

  • Hire in-house.
  • Make a few changes to the way your skilled employees go on about work
  • Improve your workplace culture
  • Try transferring employees from other office branches
  • Make use of the highly skilled gig economy.

Final Thoughts

The addressable market of applicants is substantially impacted by prestige recruiting based on credentials and experience. One of the reasons why organizations are unable to locate suitable individuals in the marketplace is because of this. It’s also one of the reasons for the severe talent shortage that’s making it difficult to meet the rising demand for software engineers.

To put it another way, the tech skills shortage is here to stay for the foreseeable future. Alternative solutions must be considered by businesses before the problem impairs their supply chains and operations. Most significantly, IT workers should sharpen their abilities in order to satisfy the growing need for experts in emerging technologies like blockchain.

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