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Jul
2014
28

ANALYST: “It’s Cheap to Say There is a Mismatch in Skills”

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The latest “business conditions” survey from the National Association of Business Economics shows an improving economic outlook with higher levels of growth and dropping unemployment.   The majority of survey participants represent companies with more than 100 employees and 40 percent represent firms with over 1,000 workers.  The survey also showed that wages are rising and echoed arguments made by Federal Reserve Board Chair Janet Yellen that discouraged workers would return to the labor force when the economy improved.  

Improving conditions have yet to come to all industries, and the group points out that employers are still reporting a shortage of skilled construction workers.  But this claim is not generally supported by strong evidence and could perhaps be more of a wage than a skills issue. Suppressing wages suppresses interest and in the big picture, the concept is simple: Pay workers well and more workers will wish to be employed by you. As Brookings Institution Economist Gary Burtless notes, the decrease in unemployment is very likely linked to rising wages:

According to the study, 43 percent of respondents “reported that their firms raised wages last quarter, the third straight quarterly rise in that share and more than double the share reporting increases a year ago.” It also found that an additional 35 percent expect to raise wages in the third quarter.

With unconcealed sarcasm, Burtless wondered whether the sudden availability of skilled workers, “might be linked” to rising wages.

“The story that there is a structural mismatch between the needs of expanding employers and the skills of the people waiting on the sideline…is based mainly on anecdotal evidence from individual companies,” he said.

When business owners complain about having difficulty filling jobs, Burtless said, “What’s always surprised me is the business journalists who decline to ask the obvious follow-on question: Have you tried offering them more money? Better benefits?”

“It’s cheap to say there is a mismatch in skills. It’s a little more expensive to pay workers more.”

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